Which statement is true of both mortgages and auto loans? a) They are riskier than student loans for lenders.

Which statement is true of both mortgages and auto loans?

a) They are riskier than student loans for lenders.

b) They do not require a minimum payment.

c) They are secured loans and generally require a down payment.

d) They have higher interest rates than credit cards.

Answer: c) They are secured loans and generally require a down payment.

Two types of loans are so-called secured loans – mortgages (for buying a property) and auto loans (for buying cars). This means, collateral is the real key in this type of credit, which is the property or the asset being purchased (it can be a house or a car). As a rule, the lenders demand own contribution, so-called down payment, from the borrowers to cover their credit risks. If the payment is not made by the debtor, the creditor may take possession of the collateral to cover his debt. Collateral and down payment is one such component which makes autoloans and mortgages differ from other unsecured loans like credit cards or student loan.