Credit is not of one type and has different purposes to use it in different verticals of life and business.
There are primarily two types of credit which is,
Secured Credit means the credit that requires you to pledge something of value in order to secure the loan. In banking terms, this is called collateral. For example, Mortgage Loan, Auto Loan, Commercial Loan, Gold Loan, Car Loan, Home Loan etc. Unsecured Credit means the credit that doesn’t require any collateral. Instead, it is based entirely on your good credit history. For example, Credit Card, Personal Loan, Student Loan etc.
Now this chapter has sufficiently elaborated the credit and lending process but the main question still remains that is how banks and lending institutions access the credit and credit worthiness? Our next topic is going to give you a brief idea of the risk accessing process.
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