The interest rate on a collateralized loan is relatively low, but one of the disadvantages of such loans is that
A)the loan must be repaid in a short period of time.
B)the assets used as collateral are tied up until the loan has been repaid.
C)the loan is difficult to obtain.
D)commercial banks do not make such loans.
E)you ruin your credit rating.

Question

Quizplus · Accepted Answer

One of the disadvantages of a collateralized loan is that the assets used as collateral are tied up until the loan has been repaid, meaning they cannot be sold or used for other purposes during that time. This can limit the borrower's flexibility in managing their assets. The other options are not true statements about collateralized loans.

The Interest Rate on a Collateralized Loan Is Relatively Low