Unsecured loan
An unsecured loan is borrowing backed only by a promise to repay, with no asset pledged, so the lender prices it on credit history, income and the debt already owed.
Credit cards, most personal loans, student loans and overdrafts are unsecured, as are debts that were never lending at all, such as an unpaid medical bill. With nothing to seize, the lender protects itself by selection and by price: it decides who qualifies, then charges a rate that has to cover the losses it expects across everyone it lends to. That is why unsecured rates sit well above secured ones, and why the gap between a strong and a weak credit profile is widest here.
Because the decision rests on the borrower rather than on an asset, the underwriting inputs are the credit file and an income test. The debt-to-income calculator works out the second of those, the share of monthly income already committed to debt payments, which is the figure a lender weighs against a new request.
Unsecured does not mean consequence-free, and that is the point people miss. In the United States a late payment is reported to the credit bureaus once it is 30 days past due, the balance can be sold to a collection agency, and the holder of the debt can sue; a judgment may then permit wage garnishment or a bank levy, with limits and exemptions set state by state. Having no collateral removes one of the lender's remedies, not all of them.