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Definition

That part of a commercial bank or other institution's lending which is not secured against an asset (usually property). Thus, credit cards and most personal loans are unsecured - which obviously means they carry greater risk. Secured loans are usually secured with a mortgage bond over property. Secured loans are obviously lent at much lower interest rates. Over the past 25 years, an entire industry of micro-lenders and organisations that offer pay-day loans has sprung up. These lenders do not require security but charge high rates of interest which often border on being usurious. The advent of the National Credit Act (34 of 2005) which imposed limitations on the provision of credit to consumers and gave them the responsibility of ensuring the consumer's ability to repay the loan. African Bank Investment Limited (ABIL) went into liquidation by over-extending itself in this market.

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