Unsecured debt interest rates are usually _____ when compared to secured debt?

1. higher

2. lower

3. the same as

4. unpredictable

Question

Unsecured debt interest rates are usually _____ when compared to secured debt?

1. higher

2. lower

3. the same as

4. unpredictable

directrix · Answer

Unsecured debt is debt in which no collateral is used to to secure the debt. The debt is unanchored so I'd say that the rates are higher.

whpalmer4 · Answer

Well, debt is priced by perceived risk.  Is it more or less risky to lend someone money if they don't have any collateral to offer?  If you lend your brother $20 and he gives you his favorite album as collateral, is he more or less likely to pay you back?

whpalmer4 · Answer

Unsecured debt is just a promise to pay.  Secured debt might be a car or home loan, where they can take your car or home from you if you fail to pay.

anonymous · Answer

2. lower

anonymous · Answer

Thank you!! (:

whpalmer4 · Answer

Don't listen to people like @soty2013 who give you answers with explaining why the answer is correct.  In this case, the answer is *not* correct!