What is the difference between a secured and unsecured loan?

Question

A) Secured loans have collateral

B) Secured loans are smaller

C) Unsecured loans have lower interest

D) Unsecured loans require collateral

Answer 1

The correct answer is:

A) Secured loans have collateral.

Secured loans are backed by collateral, such as a house or a car, which the lender can claim if the borrower fails to repay the loan. Unsecured loans, on the other hand, do not require collateral but often come with higher interest rates due to the increased risk for the lender.