In finance, credit debt refers to any type of debt or general obligation that isn't collateralised by a lien on specific assets of the borrower in the case of a bankruptcy or liquidation or failure to meet the terms for repayment.
In the case of the bankruptcy in the borrower, the unsecured creditors should have a general claim within the assets of the borrower after the specific pledged assets have been assigned to the secured creditors, however the unsecured creditors will often realize a compact proportion of these claims compared to secured creditors.
In most legal systems, unsecured creditors who are also indebted to the insolvent debtor are able (and in some jurisdictions, required) to set-off the debts, which actually puts the unsecured creditor that has a matured liability on the debtor in the pre-preferential position. [edit] Examples
payday loan Also called signature loans or bank loans. These loans will often be used by borrowers for small purchases for instance computers, home improvements, vacations or unexpected expenses. An unsecured loan means the loan originator relies on your promise to pay it back. They're going for a bigger risk than with a secured loan, so interest levels for unsecured loans tend to be higher. You normally have set payments over an agreed period and penalties may apply if you wish to repay the financing early. Short term loans are often more costly and less flexible than secured loans, but suitable if you need a short-term loan (one to five years).[2] In britain there are numerous different unsecured loans to choose from, so comparison tables have become a popular way of finding out about the various options available. In 2006, based on the Bank of England, 22% of UK households had some personal debt with a further 21% having both secured and credit debt.[3]