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5. Which of the Following Statements Is True About Secured Los Loans? 1. Unsecured Loans Require Collateral 2. Secured Loans Typically

Question

5. Which of the following statements is true about secured los loans? 1. Unsecured loans require collateral 2. Secured loans typically have lower interest rates 3. Secured loans are always easier to obtain 4. Unsecured loans have no impact on credit score

Solution

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Answer

Statement 2 is true: **Secured loans typically have lower interest rates.**Here's why:* **Secured loans:** These loans are backed by collateral (an asset like a car or house). If the borrower defaults, the lender can seize the collateral to recoup their losses. This reduces the lender's risk, allowing them to offer lower interest rates.Let's look at why the other options are incorrect:* **Statement 1:** Unsecured loans do *not* require collateral. This is the defining difference between secured and unsecured loans.* **Statement 3:** Secured loans are not *always* easier to obtain. While the presence of collateral can improve your chances, lenders still consider your credit score, income, and other factors. Someone with poor credit might still struggle to get a secured loan.* **Statement 4:** Unsecured loans *do* impact your credit score. Just like any other form of credit, responsible repayment improves your score, while late payments or defaults damage it.