The commercial finance companies usually charge a higher interest on secured short-term loansthan commercial banks because the finance companies generally end up with higher-riskborrowers.

Question

Quizplus · Accepted Answer

Commercial finance companies typically serve subprime or higher-risk borrowers, which increases the likelihood of default. To compensate for this risk, they charge higher interest rates on secured short-term loans compared to commercial banks.

The Commercial Finance Companies Usually Charge a Higher Interest on Secured