Which item Cannot be used to secure debt?
Expert-Verified Answer
A credit card cannot be used to secure a debt because it represents unsecured debt, unlike physical items such as a house or a car, which can serve as collateral.
Similarly, businesses may take out secured loans using real estate, capital equipment, inventory, invoices, or cash as collateral. Because of their reduced risks, secured loans generally have more lenient credit requirements than unsecured ones.
Explanation: The item that cannot be used to secure a debt among those listed is a credit card.
Goods and other inventory items cannot be used as collateral.
Unsecured loans include personal loans, student loans, and most credit cards—all of which can be revolving or term loans. A revolving loan is a loan that has a credit limit that can be spent, repaid, and spent again. Examples of revolving unsecured loans include credit cards and personal lines of credit.
Unsecured creditors can include suppliers, customers, HMRC and contractors. They rank after secured and preferential creditors in an insolvency situation.
The two most common examples of secured debt are mortgages and auto loans.
Mortgages, home equity loans, home equity lines of credit (HELOCs) and auto loans are all forms of secured debt.
Bonds (government, corporate, or municipal) are one of the most common types of debt securities, but there are many different examples of debt securities, including preferred stock, collateralized debt obligations, euro commercial paper, and mortgage-backed securities.
Which item Cannot be used as collateral for a loan 1 point?
The types of collateral that lenders commonly accept include cars—only if they are paid off in full—bank savings deposits, and investment accounts. Retirement accounts are not usually accepted as collateral. You also may use future paychecks as collateral for very short-term loans, and not just from payday lenders.
While every type of payment method has some disadvantages, debit cards are probably the riskiest form of payment. Debit cards do offer the convenience of a card, since you don't have to carry cash around or write a check, but the funds you use are actually tied to your bank account.
Credit cards often offer better fraud protection
With a credit card, you're typically responsible for up to $50 of unauthorized transactions or $0 if you report the loss before the credit card is used. You could be liable for much more for unauthorized transactions on your debit card.
A debenture is a type of debt instrument that is not backed by any collateral and usually has a term greater than 10 years. Debentures are backed only by the creditworthiness and reputation of the issuer. Both corporations and governments frequently issue debentures to raise capital or funds.
The types of assets that can be used as collateral vary from lender to lender, but they typically include real estate, equipment, accounts receivable, securities, and cash. By pledging collateral, the borrower reduces the lender's risk and increases their chances of approval.
Unsecured consumer debt, such as personal loans, student loans, or credit card debt, is not backed by any specific collateral. This makes it riskier for lenders, because there is no asset to seize and sell in case of default. As a result, lenders may charge higher interest rates on unsecured debt.
An unsecured bond represents an obligation not backed by any assets. If you receive an unsecured bond, you can sign an agreement that you will appear in court following your arrest. If you do not appear in court per your bond agreement, you will be fined. Unsecured bonds are considered “good faith” agreements.
A secured creditor may be the holder of a real estate mortgage, a bank with a lien on all assets, a receivables lender, an equipment lender, or the holder of a statutory lien, among other types of entities.
Secured Creditors are creditors that hold a lien on its debtor's property, whether that property is real property or personal property. The lien gives the secured creditor an interest in its debtor's property that provides for the property to be sold to satisfy the debt in cases of default.
Examples of secured debt include mortgages, auto loans and secured credit cards. Unsecured debt doesn't require collateral. But missed unsecured debt payments or defaults can still have consequences. Examples of unsecured debt include student loans, personal loans and traditional credit cards.
What are the three types of debt securities?
A debt security is any security that is representing a creditor relationship with an outside entity. The three classifications under U.S. GAAP are trading, available-for-sale, and held-to-maturity.
Unsecured debt is any debt that is not tied to an asset, like a home or automobile. This most commonly means credit card debt, but can also refer to items like personal loans and medical debt.
- #1 – Government Bonds. They are also called treasury bonds, considered the safest investment as the United States government backs them. ...
- #2 – Commercial Paper. ...
- #3 – Corporate Bonds. ...
- #4 – Treasury Bills. ...
- #5 – Municipal Bonds. ...
- Example #1. ...
- Example #2.
Expert-Verified Answer
Among the options listed, an auto loan is usually a secured debt because the car itself serves as collateral. On the other hand, a student loan, credit card, and personal loan are typically unsecured debts, meaning they do not require collateral.
Secured credit pertains to a loan that requires collateral. Best considered as secured credit are mortgages and loans.
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