Banking · Types of Loans
A bank considers the following statements while dealing with Secured Loans and Unsecured Loans. Which statement accurately reflects the difference?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1A secured loan always requires the bank to physically hold the collateral, whereas an unsecured loan only requires a guarantee.
- 2The legal charge in a secured loan provides the bank with the right to participate in the borrower's management.
- 3An unsecured loan may be converted into a secured loan if the bank demands additional security during the loan tenure, based on contractual terms.✓
- 4The interest rate differential between the two loan types is solely determined by the borrower's credit score, not the security.
Correct answer
An unsecured loan may be converted into a secured loan if the bank demands additional security during the loan tenure, based on contractual terms.
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