Unsecured Line of Credit
An unsecured line of credit allows you to borrow up to a certain amount without providing an asset, like your car or house, for the lender to seize if you default on your payments. Unlike an installment loan, which is for a specific dollar amount, an unsecured line of credit allows you to borrow as much as you need, at any time. As you repay your outstanding balance, the amount of available credit is replenished.
Unsecured credit is riskier for lenders because it's not guaranteed by any asset. To compensate for this risk, lenders usually charge higher interest rates. The interest rate charged on your unsecured debt is based on your creditworthiness. You'll qualify for the best rates if your credit is good to excellent.
While unsecured debt can protect your assets better than secured debt, it can still put your credit score and overall financial standing at risk since lenders can report late payments and file lawsuits against you.