What type of loan does not have any collateral or security attached to it?

What type of loan does not have any collateral or security attached to it?

• A. Secured Loan
• B. Collateralized Loan
• C. Unsecured Loan
• D. Guaranteed Loan

Answer: (C)

An unsecured loan is one that does not have any collateral or security backing it. This means that the lender gives the borrower funds based on their creditworthiness and ability to repay rather than on any assets that can be seized in case of default. Because there is no collateral involved, unsecured loans typically carry higher interest rates than secured loans, reflecting the increased risk for the lender. In the context of the other options, secured loans and collateralized loans involve the borrower providing assets as a guarantee for repayment. If the borrower defaults, the lender has the right to seize these assets. Guaranteed loans, meanwhile, are often backed by a third party who agrees to cover the repayment in case the borrower fails to do so, which also implies some form of security for the lender. In contrast, unsecured loans rely solely on the borrower’s promise to repay, which is why it stands out as the correct answer in this context.

An unsecured loan is one that does not have any collateral or security backing it. This means that the lender gives the borrower funds based on their creditworthiness and ability to repay rather than on any assets that can be seized in case of default. Because there is no collateral involved, unsecured loans typically carry higher interest rates than secured loans, reflecting the increased risk for the lender.

In the context of the other options, secured loans and collateralized loans involve the borrower providing assets as a guarantee for repayment. If the borrower defaults, the lender has the right to seize these assets. Guaranteed loans, meanwhile, are often backed by a third party who agrees to cover the repayment in case the borrower fails to do so, which also implies some form of security for the lender. In contrast, unsecured loans rely solely on the borrower’s promise to repay, which is why it stands out as the correct answer in this context.