John buys a new car with the help of a loan. He permits the creditor to take possession of the car if he cannot repay the loan in time. Here, the car is the ________.
A) after-acquired property
B) collateral
C) intangible personal property
D) floating lien

Question

Quizplus · Accepted Answer

In this scenario, the car is acting as collateral. Collateral is property or assets that a borrower offers to a lender to secure a loan. If the borrower fails to repay the loan, the lender can seize the collateral as a means of collecting the debt. Therefore, choice (B) is the correct answer. The other options are not applicable here - after-acquired property refers to property obtained after a security agreement is created, intangible personal property refers to assets such as patents and copyrights, and a floating lien is a security interest that attaches to a changing pool of assets.

John Buys a New Car with the Help of a Loan