Secured Transactions Explained

A secured transaction involves one or more parties providing assurance to pay another party, backed by property as collateral. If the borrower fails to pay, the lender can claim the collateral. The transaction includes a loan, an obligation to repay, collateral, and a security interest. These elements ensure the lender's right to repossess the collateral if the borrower defaults.

What is a secured transaction primarily backed by?

• A handshake

• A promise

• Property

• A contract

In a secured transaction, what can a seller do if the buyer fails to pay?

• Sue the buyer

• Reclaim the collateral

• Cancel the transaction

• Negotiate a new deal

Which of the following is NOT an element of a secured transaction?

• Interest rate

• Collateral

• Obligation to repay

• Loan of money

What is the role of collateral in a secured transaction?

• To serve as a backup payment method

• To act as a guarantee for the loan

• To increase the loan amount

• To reduce the interest rate

What happens to the collateral if the loan is not repaid?

• It is returned to the borrower

• It is sold to recover the loan amount

• It is destroyed

• It is given to a third party