8. What type of loan requires collateral? A) Secured loan B) Unsecured loan C) Line of credit D) Open-end credit

A secured loan is one that requires collateral—something of value that you pledge to the lender to secure the loan. If you fail to make payments, they have the right to seize that collateral, which could be your car, home, or other assets. This type of loan typically has lower interest rates than unsecured loans because the lender faces less risk. On the other hand, unsecured loans don’t require any collateral and are based solely on your creditworthiness. Think of personal loans or credit cards! However, because the lender has no direct claim on any assets, the interest rates tend to be higher to compensate for the increased risk. Make sure to choose the right type for your financial situation!