Unsecured loans: what are they?

When it comes to personal finance, loans are an invaluable tool that help to empower Canadians to meet their financial goals and aspirations.
Unsecured loans: what are they?

When it comes to personal finance, loans are an invaluable tool that help to empower Canadians to meet their financial goals and aspirations. Out of all of the different types of loan on offer in Canada, unsecured loans have gained attention because of their accessibility and flexibility. Lenders simply provide funds to a borrower without any kind of legal claim to their assets in case of default. Unsecured loans play a key role in helping individuals to bridge financial gaps, fund unexpected expenses, or meet financial goals. In this article, we explain what unsecured loans are, how they work, and why they are so important in the financial landscape.

Unsecured loans: what are they?

Unsecured loans are loans that do not require collateral to secure borrowed funds. This means that borrowers do not need to surrender any assets, like vehicles, as security against the loan. As unsecured loans mean that the lender has no right to the borrower’s assets in case of default, it is a riskier type of loan for lenders and financial institutions. The lender has to rely on the borrower’s ability to repay their loan, their income, and creditworthiness. Often, this type of lending is for individuals with a strong credit report and borrowing capacity. Because these loans are unsecured, without any collateral involved, the interest rates are usually less favourable than those for secured loans, whereby lenders have a claim to the borrower’s assets.

What are the characteristics of unsecured loans?

Unsecured loans typically have the following characteristics in Canada:

  • No requirement for collateral. This is the primary difference between unsecured loans and secured loans. It means that unsecured loans are available to many more borrowers who may not own valuable assets that can be used as security.
  • Quick access. Unsecured loans are usually pretty quick to process compared to secured loans as they do not require the extensive appraisal and documentation needed for collateral valuation.
  • Credit-based approval. Lenders will often look seriously at the borrower’s credit score when looking at applications for unsecured loans. A higher credit score will usually mean better loan terms, including lower interest rates.
  • Flexible usage. Unsecured loans offer borrowers the freedom to use the funds for different purposes. Whether it is debt consolidation, emergency expenses, or vacations, borrowers have flexibility when it comes to using the funds.
  • Higher interest rates. Because unsecured loans pose a greater risk for lenders, the interest rates are usually higher than those for secured loans. The repayment terms can vary too, depending on the borrower’s credit history.

Why are unsecured loans important?

Unsecured loans are an important part of Canada’s financial ecosystem. They allow individuals to make investments in life goals (student loans, for instance), fund unexpected expenses like medical bills, consolidate their debt, or even start a business without risking their valuable assets. Some Canadians will not have substantial collateral, and so unsecured loans enable them to borrow funds when required. Despite the multiple benefits of unsecured loans, it is really important to be cautious and responsible when thinking about taking on an unsecured loan. They come with higher interest rates, and can quickly escalate in cost as unsecured debts if not repaid in full and on time. Borrowers should carefully assess their financial situations, and learn how to budget appropriately to ensure they can comfortable commit to their loan. If you feel like your debts are becoming too much, you should speak to a reputable Licensed Insolvency Trustee. Licensed Insolvency Trustees are the only professionals in Canada legally able to file all forms of debt relief. This makes them extremely well placed to review your financial situation, and advise you on your options.

Unsecured loans are important in providing financial solutions to many Canadians, offering flexibility without the need for collateral. They should, however, be handled carefully. If you have any questions or concerns about unsecured loans, you should book a free consultation with an experienced Licensed Insolvency Trustee at Spergel. We can help you to navigate the complexities of personal finance. Reach out today – you owe it to yourself.

What to read next

Alan Spergel

About the Author

Alan Spergel

CPA, CA, FCIRP, CPE Licensed Insolvency Trustee, Founder and President, msi Spergel Inc.

Alan Spergel is the founder and President of Spergel. A leader in our industry, he is also a former chair of the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) and has served on Canada's Superintendent of Bankruptcy Management Board. He actively supports multiple charities, ensuring that Spergel gives back to our communities and has recently been appointed as Chairman of the Board of the Humber River Hospital Foundation. Outside of the boardroom, you can find Alan playing golf, tennis, or skiing and enjoying quality time with his grandchildren.

Contact Details for Alan Spergel

Email

aspergel@spergel.ca

Toll Free Number

1 (877) 557-7367

Local Number

(877) 570-3435

Main Office

North York (Head Office)

200 Yorkland Boulevard, Suite #1100, Toronto, ON, M2J 5C1

Get Real-World Money Tips and Insights Straight to Your Inbox

Stay informed with practical advice, tools, and stories designed to help you take control of your debt and build a stronger financial future. No jargon, no judgment — just support that makes sense.

Home old

Subscribe to our Newsletter

"*" indicates required fields

Get Informed, Feel Empowered

Money Tips, Tools & Trackers, Research, Articles, Media and More!

Articles
Unpaid credit card debt consequences - what are they?

Unpaid credit card debt consequences – what are they?

Receiving credit card bills you know you cannot afford is a tough scenario. It can also often escalate – credit card debt can rack up, and it may have a knock on effect on other payments you owe, like payday loans or utility bills.

Overview
Articles
Should you file for bankruptcy?

Should you file for bankruptcy?

If you are wondering ‘should you file for bankruptcy?’, chances are you are struggling with unmanageable debt and looking for a fast solution.

Overview
Articles
Credit card payment holiday: all you need to know

Credit card payment holiday: all you need to know

Since the COVID-19 pandemic brought unprecedented challenges to individuals and businesses across the world, the Canadian government and financial institutions have implemented various measures to provide relief to those affected financially, or simply facing financial difficulties.

Overview
Articles
Defer mortgage payment: a guide to deferrals

Defer mortgage payment: a guide to deferrals

There are many reasons why many of us struggle at some point to make our mortgage payments on time in Canada. Financial hardship, unexpected expenses, or even economic downturns and an increase in the cost of living are all reasons it may be difficult to make timely mortgage payments.

Overview
Articles
Debt snowball method - what is it?

Debt snowball method – what is it?

The average consumer debt in Canada for Q2 2022 – excluding mortgages – totalled a whopping $21,128, with mortgage borrowing also on the rise year on year.

Overview
Articles
How to use a credit card responsibly

How to use a credit card responsibly

Credit cards can be powerful financial tools when used responsibly. They offer convenience, delayed payments, security, and even rewards, but mismanaging credit can lead to credit card debt and financial stress.

Overview
Articles
How much student loan debt is too much?

How much student loan debt is too much?

Student loan debt is undoubtedly a growing problem across Canada. Many Canadian students are not always clued up as to what exactly they are agreeing to when they take out a student loan, which leads to problems further down the line.

Overview

Get Everything You’re Looking For - All In One Spot

How We’ve Helped Others

Every debt story is different — and so is every solution. Here’s what real clients had to say about working with Spergel.

We Know the Hardest Part is the First Step

It’s also the most important step. Let’s talk – we guarantee that we can help you.

Quick Contact Form

"*" indicates required fields

This field is for validation purposes and should be left unchanged.

Book a Specific Date/Time

Call Us During Business Hours

When you call, you will be connected with one of our Licensed Insolvency Trustees (LITs) during our regular business hours.

Toll Free: 1-877-557-7367

Monday to Friday 8am – 7pm EST

Saturday 9am – 4pm EST

Sunday 10am – 5pm EST

You can also reach us at one of our office locations phone numbers. See our list below on this page.

Mobile Text Us During Business Hours

From your phone, you will be connected with one of our Licensed Insolvency Trustees (LITs) during our regular business hours.

Monday to Friday 8am – 7pm EST

Saturday 9am – 4pm EST

Sunday 10am – 5pm EST

Not during office hours? Use our Chat on this page 24/7 and get connected for answers and live chat later.

Email Us

Sometimes a simple email is the way to get things rolling.

Expect a reply from us during our business hours:

Monday to Friday 8am – 7pm EST

Saturday 9am – 4pm EST

Sunday 10am – 5pm EST

Click the button below to reach or use our email address:
hello@spergel.ca

Judgement-Free and Zero Pressure.

Let’s Find What Works for You

Busy Schedule? Book a Date/Time:

Prefer to Call? Reach Us Here (Toll Free):

Scroll to Top