Ashton borrows $25,000 from Amanda. Amanda lends the money to Ashton without taking an interest in collateral for the loan. Amanda is relying on Ashton's credit standing when she made the loan. What kind of creditor is Amanda?

Question

Quizplus · Accepted Answer

Amanda is an unsecured creditor because she did not ask for any collateral from Ashton when she lent him the money. Therefore, she does not have any security interest in any of Ashton's property. Instead, she is relying on Ashton's creditworthiness to repay the loan. An unsecured creditor is someone who extends credit without obtaining a security interest in the debtor's property.

Ashton Borrows $25,000 from Amanda