A loan backed by an asset the lender can sell to pay off the loan if the borrower defaults is called _____.

Question

Quizplus · Accepted Answer

A loan that is collateralized means that the lender has a security interest in an asset that the borrower pledges as collateral. If the borrower defaults, the lender can sell the collateral to recover the amount owed on the loan. This reduces the lender's risk and makes the loan less risky, which may result in lower interest rates for the borrower.

A Loan Backed by an Asset the Lender Can Sell