What type of credit is issued based on a borrower's reliability rather than the value of an asset?

Unsecured credit is issued based on a borrower's creditworthiness and ability to repay rather than being backed by collateral, such as an asset. Lenders assess factors like credit score, income, and repayment history to determine whether to extend credit. This type of credit carries more risk for the lender because if the borrower defaults, they have no collateral to claim.

This makes unsecured credit generally carry higher interest rates compared to secured credit, which is backed by an asset. In contrast, revolving credit allows borrowers to access a certain amount of funds repeatedly without having to reapply, and installment credit involves fixed payments over a specified term. However, both of these types can be secured or unsecured. Thus, the key distinguishing factor for unsecured credit lies in its reliance solely on the borrower's reliability.