Secured loans are less costly than unsecured loans because:

A. They are backed by collateral.

B. They have lower interest rates.

C. The risk to the lender is reduced.

D. All of the above.

Answer:

Secured loans are typically less costly than unsecured loans because they require collateral, which reduces risk for the lender, leading to lower interest rates. Unsecured loans do not have this collateral requirement and thus, typically have higher interest rates.

Explanation:

Secured loans are typically less costly than unsecured loans because they are considered less risky for the lender. The risk is lower because secured loans require collateral, such as a car or house, that the lender can claim if the borrower fails to repay the loan. This collateral provides security for the lender. Consequently, for taking less risk the lender generally charges a lower interest rate. In contrast, unsecured loans do not require collateral. Therefore, they are considered higher risk and usually come with a higher interest rate, thus making them more costly for the borrower.