Question

Unsecured loans are sometimes called

a) Payday

b) Bank

c) Signature

d) Cash advance loans

Answer 1

Unsecured loans, which do not require collateral, are sometimes called signature loans. The correct answer is c) Signature. Payday and cash advance loans are also unsecured but are expected to be repaid by the next payday.

Step-by-step explanation:

Unsecured loans are sometimes called signature loans, which is reflected in option c). Such loans do not require collateral, which is something valuable that a lender can seize if the borrower does not repay the loan. Instead, these are based on the borrower's creditworthiness and typically involve a simple agreement or signature promising to repay. They may also be referred to as personal loans or signature loans.

Other types of unsecured short-term borrowing include payday loans and cash advance loans, which are not backed by collateral but often have high interest rates and fees. These terms refer to loans that are usually expected to be repaid by the borrower's next payday or provide immediate cash before an upcoming paycheck.

Answer 2

Unsecured loans are known as signature loans, relying on the borrower's promise to pay without collateral. Banks assess creditworthiness through income verification and credit checks, and sometimes require a cosigner for additional security.

Step-by-step explanation:

Unsecured loans, which refer to loans that are not backed by collateral, come in various forms. Among the options provided, unsecured loans are sometimes called signature loans (option c), as these require only the borrower's signature and promise to pay, instead of a form of physical collateral. Unlike secured loans, where collateral such as property or equipment can be seized if the borrower defaults, unsecured loans rely heavily on the borrower's creditworthiness. This creditworthiness is determined, in part, by income sources and a credit check conducted by the bank. Another form of security for a loan can include a cosigner, who pledges to repay the loan if the original borrower defaults. Owing to the greater risk to the lender with an unsecured loan, they may attract a higher interest rate compared to secured loans.