The distinction between a "secured" lender and an "unsecured" lender is that in the event of the bankruptcy of the borrower
A) the unsecured lender has first claim on collateral.
B) the secured lender has first claim on collateral.
C) the secured lender has a first claim on all of the assets of the bankrupt borrower.
D) the unsecured lender has a first claim on all of the assets of the bankrupt borrower.

Question

Quizplus · Accepted Answer

A secured lender has a claim on specific collateral or assets that were pledged as security for the loan. Therefore, in the event of bankruptcy, the secured lender has the first claim on that collateral to recover their funds. On the other hand, an unsecured lender has no specific collateral or assets pledged to secure the loan and therefore has a lower priority in recovering their funds compared to a secured lender.

The Distinction Between a "Secured" Lender and an "Unsecured" Lender