Personal Loans

Question 4 • 2025-2026 GSP Mathematical Reasoning for Decision Making

In a secured loan, collateral is _____.

Answer

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

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

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

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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