Special Considerations for an Unsecured Loan

If a borrower defaults on a secured loan, the lender can repossess the collateral to recoup the losses. In contrast, if a borrower defaults on an unsecured loan, the lender cannot claim any property. However, the lender can take other actions, such as commissioning a collection agency to collect the debt or taking the borrower to court. If the court rules in the lender&rsquos favor, the borrower&rsquos wages may be garnished. Also, a lien may be placed on the borrower&rsquos home, or the borrower may be otherwise ordered to pay the debt.