Final answer:
The options listed, such as Single-prepayment penalty or Balloon payment,
are terms related to loan repayment and do not determine if a consumer purpose loan is secured.
A loan is secured based on the presence of collateral in the loan agreement.
Step-by-step explanation:
The question is about different types of prepayment penalty structures in the context of a consumer purpose loan. None of the options given (Single-prepayment penalty,
Multi-prepayment penalty, Yield-spread premium, Balloon payment) inherently make a consumer purpose loan secured. Instead, these options are terms relating to the repayment or financing structure of the loan.
A secured loan is one that is backed by collateral, such as property or other assets. Whether a loan is secured or not depends on the agreement that includes the collateral,
not solely on the presence of a prepayment penalty or other features listed.
The prepayment penalty structure that makes a consumer purpose loan secured is the single-prepayment penalty. This penalty refers to a fee charged to a borrower if they pay off their loan in full before its maturity date.
It is a deterrent for early repayment and helps protect the lender's interest.
For example, let's say a consumer takes out a loan to purchase a car. If they decide to pay off the loan early, they may be charged a penalty, which acts as a safeguard for the lender against potential losses due to early repayment.