Which of the following is an example of secured debt?

Which of the following is an example of secured debt?

• A. Credit card debt
• B. Mortgages
• C. Unsecured personal loans
• D. Utility bills

Answer: (B)

Secured debt is a type of borrowing that is backed by an asset, which serves as collateral for the loan. This means that if the borrower fails to repay the loan, the lender has the right to take possession of the asset to recover their funds. In the case of mortgages, this is a prime example since the loan is secured by the property being purchased. If the borrower defaults, the lender can foreclose on the house, allowing them to recoup their investment. In contrast, credit card debt, unsecured personal loans, and utility bills do not have collateral backing them. Credit card debt is a form of unsecured debt where the lender has no claim on specific assets if the borrower fails to repay. Unsecured personal loans similarly do not require any collateral, leaving the lender with limited recourse beyond legal action to recover the funds. Utility bills represent services provided on credit and are not debts secured by any assets. Thus, the uniqueness of mortgages as secured debt underlines the importance of collateral in determining the type of borrowing arrangement.

Secured debt is a type of borrowing that is backed by an asset, which serves as collateral for the loan. This means that if the borrower fails to repay the loan, the lender has the right to take possession of the asset to recover their funds. In the case of mortgages, this is a prime example since the loan is secured by the property being purchased. If the borrower defaults, the lender can foreclose on the house, allowing them to recoup their investment.

In contrast, credit card debt, unsecured personal loans, and utility bills do not have collateral backing them. Credit card debt is a form of unsecured debt where the lender has no claim on specific assets if the borrower fails to repay. Unsecured personal loans similarly do not require any collateral, leaving the lender with limited recourse beyond legal action to recover the funds. Utility bills represent services provided on credit and are not debts secured by any assets. Thus, the uniqueness of mortgages as secured debt underlines the importance of collateral in determining the type of borrowing arrangement.