Why are student loans considered unsecured apex? Check Now
Loans given to students are unsecured due because, when lenders give out loans to students there is nothing called collateral that can be seized when they don’t pay the loan back.
Every financial institution works for profit, investing back into the business and planning for the future towards greater heights therefore when a client won’t have any collateral which weights to pay back what has been taken then, it is a NO lending offer.
Larger loans come with more risks therefore lenders are very careful when involving themselves in such assistance to customers.
What is collateral in this sense?
When somebody talks about collateral, they simply mean the asset that a lender can accept in the name of security against a loan taken by their client or customer.
What can be accepted as collateral for a loan?
Assets to be accepted as collateral for loans can be real estate or any other valuable asset that has the potential to pay back. Any other kind of assets will be accepted by the lender depending on what (purpose) the loan is taken for.
Lenders always brief their customers about their terms and conditions in such an engagement (for loan). Their terms include how the loan should be paid, and the set period for repayment of debts with their interest.
Consider the following question with the provided answer options:
The question reads: Why are student loans considered unsecured apex?
(A) Financial institutions can’t make plow the highest profit on student loans because their
interest rates will be low.
(B) The lenders don’t have any collateral to seize to pay back the loan taken by students.
(C) Students can not make interest payments because they are in school so unless they graduate.
(D) Student loans are not covered by insurance in the name of the government.
Per the discussion, before this question, all answers fit, but option B is a bit elevated as the best answer.