Zachary graduated from college. He paid for much of his education with student loans. These loans are not backed by any specific asset.

Zachary's student loans are an example of what type of loan?

secured loan

unsecured loan

mortgage loan

auto loan

Answer unsecured loan

unsecured loan

Explanation:

Loans that are issued without the need for collateral are unsecured loans. The loans are not backed by any financial asset. A lender will use different criteria to qualify a borrower for unsecured loans. Should a client with an unsecured default, the bank does not have rights to the physical properties of the client.

In most cases, banks will have schemes through which customers qualify for unsecured loans. For example, a bank can negotiate with its corporate clients for the employees' to qualify for unsecured loans. There also schemes for students and clients with good credit scores to get unsecured loans.