Which statement describes a title loan?

Which statement describes a title loan?

• A. The borrower gives the lender his/her automobile title in exchange for a set amount of cash. The lender holds the title until the loan is repaid. If the loan is not repaid as agreed, the lender keeps title to the item.
• B. A loan secured by the borrower's house deed
• C. The borrower receives a loan with no collateral
• D. The lender holds the car as collateral for a loan

Answer: (A)

A title loan uses the borrower’s vehicle title as collateral. The borrower hands over the car title to the lender in exchange for cash, and the lender keeps the title until the loan is repaid. If the loan isn’t repaid as agreed, the lender can claim the title and the vehicle. This describes the specific setup of a title loan, where the title is the security interest rather than the car itself. The other statements describe different kinds of loans. A loan secured by the house deed is mortgage-based financing, not a title loan. A loan with no collateral is unsecured. And the idea that the lender holds the car as collateral describes a typical auto loan, where the car itself serves as collateral, not the title. In a title loan, it’s the title, not the physical car, that is held as security.

A title loan uses the borrower’s vehicle title as collateral. The borrower hands over the car title to the lender in exchange for cash, and the lender keeps the title until the loan is repaid. If the loan isn’t repaid as agreed, the lender can claim the title and the vehicle. This describes the specific setup of a title loan, where the title is the security interest rather than the car itself.

The other statements describe different kinds of loans. A loan secured by the house deed is mortgage-based financing, not a title loan. A loan with no collateral is unsecured. And the idea that the lender holds the car as collateral describes a typical auto loan, where the car itself serves as collateral, not the title. In a title loan, it’s the title, not the physical car, that is held as security.