An unsecured loan is the opposite of a secured loan as it is not backed by an asset or collateral, it is a loan of which there is no backing accept for the legal ramifications of possibly someone suing for payment.

As an unsecured loan for a company, I have taken unsecured loans from friends and investors for higher interest rates in order not to encumber the assets in the event I had to take another loan in the future. The other loan would likely help consolidate the loans but would be secured. It also gave me the flexibility to sell assets within the company for additional cash flow. As an entrepreneur, unsecured loans and unsecured loan documents became very important parts of a the working company. The need for loan documents happened at least once a quarter as we shuffled one loan for another or repaid and borrow again. The loan documents at are sufficient for making the Loan Document you would need in these matters.

For unsecured loans with friends and family, I have borrowed money with the promise I would pay them back. The nice part of the unsecured loan of course is that you have flexibility with your assets and cash flow. Secured loans often have many conditions on what you can’t and cannot do making your worth less manageable.

Unsecured loans from Banks and Credit Card or finance companies often is also based upon credit ratings. In this case, the loan is much more difficult to get as it is based solely on credit rating, which factors in the borrowers income or cashflow.

Obviously if your friend is lending you money it is not based on credit score, its about your friendship. But I highly recommend documenting the loan at for showing your payment schedule and keeping a good track record with friends and family. Your friend rating is often just as important as the credit rating, because you will likely go back to your friends more often than you will your bank. The only thing at stake is your friendship, but it is also your cashflow. Some people call this friends and family loans, some call it Love Money, some call it goodwill lending, its all similar in concept to one common definition, they are all unsecured loans.

Unsecured loans with financial institutions are generally personal unsecured loans which the individual has made a personal pledge to repay, a business unsecured loan or unsecured business loan, of which the company makes an obligation to pay similar to the example above, or there is an unsecured business loan with a personal guarantee to pay. All three of these types of loans I have personally done within the last year! How is that for a need for good loan documentation? It is actually why I came up with the idea of this blog and the company document creator as it automates a process I have to repeat often.

I hope you enjoyed this definition of an unsecured loan and blog.