Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

Which type of loan usually involves collateral such as real estate?

1. Unsecured loan

2. Open-end credit

3. Securitized loan

4. Secured loan

The correct answer is: Secured loan

A secured loan typically involves the borrower providing collateral, which can often be in the form of real estate. This collateral serves as a guarantee for the lender; if the borrower fails to repay the loan, the lender has the right to seize the collateral in order to recover their losses. Because real estate is a significant asset, it is commonly used as collateral for various types of secured loans, such as mortgages. In contrast, unsecured loans do not require collateral, which means they carry a higher risk for lenders and often come with higher interest rates. Open-end credit, such as credit cards, allows borrowers to draw on a credit limit without the need for collateral. Securitized loans involve pooling various types of debt—often including secured loans—and selling them as securities, but individual loans in this context may still be secured or unsecured depending on their terms. Understanding the distinction between these types of loans is critical in real estate finance.