Borrowers with a history of bad credit would find it impossible to receive funding for a loan without offering a very high quality collateral as security.
Lenders, in this case, have more risk compared to a secured loan. To compensate against the increased risk, lenders charges comparatively higher rate of interest in case of unsecured loans. Lenders usually charge a lower interest rate up front for variable-rate loans because the lender will not lose any money if the overall market interest rates increase. Lenders prefer the borrower to have a good credit history because they do not have any collateral on you. That is why it’s harder for credit card companies to obtain payments from you.
