If loan exposure is supported by collateral, it's said to be__________________.
Secured Credit Explained
When a loan or credit exposure is backed by specific assets, known as collateral, it is referred to as secured credit.
Understanding Collateral
Collateral acts as security for the lender. If the borrower defaults on the loan payments, the lender can seize and sell the collateral to recover their losses.
Secured vs. Unsecured Credit
This is distinct from unsecured credit, which is granted based solely on the borrower's creditworthiness and reputation, without any specific asset backing it.
Conclusion
Therefore, loan exposure supported by collateral is defined as secured credit.
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