Question
10. What is an unsecured loan? A) A loan backed by collateral B) A loan without the need for a cosigner C) A loan that doesn't require collateral D) A loan that is always interest-free
Ask by Schwartz Daniel. in the United States
Feb 03,2025
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Answer
An unsecured loan is a loan that doesn't require collateral.
Solution
An unsecured loan is defined as a loan that does not require collateral. This means that the lender does not have a claim on any specific asset if the borrower fails to repay the loan.
Given the options:
A) A loan backed by collateral - This describes a secured loan, not an unsecured loan.
B) A loan without the need for a cosigner - This does not specifically define an unsecured loan, as a cosigner can be required for both secured and unsecured loans.
C) A loan that doesn't require collateral - This is the correct definition of an unsecured loan.
D) A loan that is always interest-free - This is not true, as unsecured loans typically have interest rates.
Therefore, the correct answer is **C) A loan that doesn't require collateral**.
Reviewed and approved by the UpStudy tutoring team
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Simplify this solution Extra Insights
Unsecured loans are like borrowing money based on trust. They don’t require any asset as collateral, which means lenders can't take your stuff if you don't pay them back. Instead, they rely on your credit history and income to gauge how likely you are to repay. The catch is, because they’re riskier for lenders, these loans often come with higher interest rates! Using unsecured loans can be a real lifesaver in emergencies, such as medical expenses or urgent home repairs. Just remember that while they’re convenient, it’s crucial to have a solid plan to repay them. Otherwise, the high-interest costs can quickly spiral out of control, leaving you in debt!
