The risk associated with an unsecured loan is greater than the risk associated with an otherwise identical secured loan.

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An unsecured loan does not require collateral, which means the lender has no asset to seize if the borrower fails to repay the loan. This increases the risk for the lender, which is reflected in higher interest rates and stricter eligibility criteria. In contrast, a secured loan is backed by collateral, such as a house or a car, which the lender can seize if the borrower defaults on the loan. This reduces the risk for the lender, resulting in lower interest rates and more favorable terms for the borrower.

The Risk Associated with an Unsecured Loan Is Greater Than