Question

Why does an unsecured loan have a higher interest rate than a secured loan?
The bank bears all the risk of the loan.
The bank charges more for poor credit scores.
The bank bases higher interest rates on market conditions.
The bank raises rates unfairly for unsecured loans.

Answer 1

(A) The bank bears all the risk of the loan.

Since the person isn't using anything of value, as with a secured loan, the lender faces a higher level of risk. Because of that, the interest rate for this kind of loan(unsecured), is often higher.

Answer 2

An unsecured loan have a higher interest rate than a secured loan because the bank bears all the risk of the loan.

What are Loans?

Loans can be defined as an amount an individual borrows from a financial institution or a an individual over a priod of time, and they are expected to payback with interest.

In summary, what qualitifies an amount borrowed as a loan is the interest paid.

Learn more about loans here:

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