Final answer:
A secured loan is guaranteed by collateral, typically an asset pledged by the borrower to secure the loan, providing lenders with a way to recover funds in case of default.
Explanation:
A secured loan is a type of loan that is guaranteed by collateral, which is an asset pledged by the borrower to secure the loan. In the event of default, the lender can seize the collateral to recoup the loan amount.
For example, when a borrower takes out a secured car loan, the car itself serves as collateral. If the borrower fails to make payments, the lender can repossess the car to cover the outstanding loan balance.
Interest rates, on the other hand, refer to the cost of borrowing money and are not what guarantees a secured loan.
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