Answers 1442 Personal Finance B CA Personal LoansQuestion 19

19

QuizMultiple Choice

Personal Loans

Question 19 • 1442 Personal Finance B CA

In a secured loan, collateral is _____.

Answer

A

valuable property that the borrower promises to give the lender in the event of default on the loan

B

an agreement made in civil court agreeing that the borrower may be arrested in the event of default on the loan

C

an agreement signed by a co-borrower promising to pay the loan in the event the primary borrower defaults on the loan

D

and insurance policy taken out by the lender and paid for by the borrower to cover the lender from loss in the event of default

Explanation

Collateral is valuable property pledged to secure a loan. If the borrower defaults, the lender may take or sell that property to recover the unpaid amount. This matches choice A; a co-borrower’s promise to repay is a separate guarantee, not collateral.

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