What kind of loan is a federal student loan?
• A secured personal loan
• An unsecured installment loan
• An unsecured collateral loan
• A revolving line of credit
A federal student loan is an unsecured installment loan.
A federal student loan is an unsecured installment loan.
A federal student loan is an example of an unsecured installment loan. To understand this, let's break it down:
1. Secured personal loan: This type of loan requires borrowers to offer collateral, such as a home or car, that the lender can seize if the borrower fails to repay. However, federal student loans do not require collateral, so they are not secured personal loans.
2. Unsecured collateral loan: This type of loan does not require collateral, but it does involve a lien on a specific asset the borrower already owns, such as jewelry or artwork. Similar to secured personal loans, federal student loans do not involve collateral, so they are not unsecured collateral loans.
3. Revolving line of credit: This refers to a type of loan where borrowers have a set credit limit which can be used repeatedly within that limit. Examples include credit cards or home equity lines of credit. Federal student loans, on the other hand, are not revolving lines of credit as they are typically provided as a one-time lump sum.
4. Unsecured installment loan: This is the correct option. An installment loan is when a lender provides a borrower with a fixed amount of money, which is then repaid in regular installments over a set period of time. Federal student loans fall into this category since they are granted without collateral and are repaid in installments.
In conclusion, a federal student loan is an unsecured installment loan.