Classifying Types of Loans

Classifying Types of Loans

By the end of this lesson you will know what type of loans are classified as Secured and Unsecured

Unsecured Loan

• Given to borrowers based on their financial resources or ability to repay the loan

• Nothing "secures" the loan in other words

• Lender does not have the rights to a specific asset if loan is not repaid

• Examples: Personal Loan, Student Loans, and personal lines of credit

Multiple Select

Check the Loans that are Unsecured Loans

• Student Loans

• Personal Loans

• Camper Loan

• Credit Cards

Secured Loan

• Usually needed when borrowing large amounts of money

• Loan is "secured" with collateral.

• In other words, if you default on the loan and your house was used as collateral- they would take the house

• Have lower interest rates and longer repayment terms

• Examples: Automobile loans, mortgages and home equity loans

Multiple Select

Check off the Secured Loans

• Camper Loan

• Automobile Loan

• Home Loan

• Credit Card

Fill in the Blank

____________ loan is one that is backed up by an asset the lender can take in possession if loan isn't repaid.

Multiple Choice

A loan that has no financial backing by an asset if loan isn't repaid. Interest rates tend to be higher.

• Secured

• Unsecured

The End

Now you understand the two different loan classifications!

Remember that for the future!