Which of the following is a feature of secured debt?

• A. An unsecured loan with higher interest
• B. A loan backed by collateral
• C. A revolving line of credit
• D. A type of mortgage

Answer: (B)

Secured debt is characterized primarily by the backing of collateral, which provides lenders with a form of security if the borrower defaults on the loan. This means that the lender has a claim to the asset used as collateral, allowing them to recover some or all of their funds by seizing the collateral if necessary. Common examples of secured debt include car loans and mortgages, where the car or property serves as collateral for the loan.

In contrast, unsecured loans do not have collateral backing them, typically featuring higher interest rates to compensate for the increased risk to the lender. A revolving line of credit, such as a credit card, does not inherently secure the debt against an asset and operates differently from traditional loans. While a mortgage is indeed a type of secured debt, the defining feature of secured debt in this context is its backing by collateral, making it the accurate choice among the options.