Which type of credit product is characterized by having no specific asset backing it?

Unsecured credit is defined as credit that is not backed by any specific asset or collateral. This means that lenders provide funds based solely on the borrower's creditworthiness and promise to repay, rather than tied to a physical asset that can be claimed if the loan is not repaid.

In contrast, secured credit involves an asset backing the loan, such as a car or a house, which the lender can seize if the borrower defaults. Installment loans are a specific type of credit that require fixed payments over a set period, often secured or unsecured, but lacking the defining characteristic of unsecured credit. Revolving lines of credit allow consumers to borrow against a set limit and pay back over time, but they can also be secured or unsecured, depending on the terms.

The absence of collateral in unsecured credit makes it higher risk for lenders, which is why interest rates can be higher compared to secured credit options. Understanding the implications of unsecured credit is essential for assessing risks and making informed financial decisions.