Collateral
A)gives the lender additional recourse if the payments are not made.
B)is used on unsecured loans.
C)increases the interest rate on loans.
D)is required on all loans except revolving credit.

Question

Quizplus · Accepted Answer

Collateral provides security for the lender, as it gives them additional recourse if the borrower fails to make their payments. In the event of default, the lender can seize and sell the collateral to recoup their losses. Therefore, collateral is often required for secured loans, such as home mortgages or car loans, but not for unsecured loans like credit cards or personal loans. The presence of collateral may also potentially lower the interest rate on a loan, as it reduces the lender's risk.