More common day to day borrowing is generally done through unsecured loans. Credit cards, bank overdrafts and personal loans are used by most people every day and any line of credit which you accept and use which does not need any collateral as security is essentially an unsecured loan. In order to make unsecured loans profitable for the lender the interest on unsecured loans is often higher than on a secured loan. Lenders of unsecured loans take higher risks when lending as they have no security on their loans. If the borrower defaults the only way to recover the money lost is through a legal process and this is cumbersome for the lender.