What is the correct description of a loan that is backed by the borrower’s property as collateral?

What is the correct description of a loan that is backed by the borrower’s property as collateral?

• A. Mortgage
• B. Accrued liability
• C. Interest-bearing loan
• D. Equity loan

Answer: (A)

When a loan is secured by the borrower's property, the property serves as collateral to guarantee repayment. This arrangement is called a mortgage. The lender holds a lien on the real estate, so if the borrower defaults, foreclosure lets the lender sell the property to recover the loan. An accrued liability isn’t about collateral; it’s an amount owed that has accumulated but not yet paid. An interest-bearing loan just indicates that interest is charged, but doesn’t specify whether collateral is involved. An equity loan uses the homeowner’s equity as collateral, which is related but refers to the portion of value already paid toward ownership, whereas the standard term for a loan secured by real estate is a mortgage.

When a loan is secured by the borrower's property, the property serves as collateral to guarantee repayment. This arrangement is called a mortgage. The lender holds a lien on the real estate, so if the borrower defaults, foreclosure lets the lender sell the property to recover the loan.

An accrued liability isn’t about collateral; it’s an amount owed that has accumulated but not yet paid. An interest-bearing loan just indicates that interest is charged, but doesn’t specify whether collateral is involved. An equity loan uses the homeowner’s equity as collateral, which is related but refers to the portion of value already paid toward ownership, whereas the standard term for a loan secured by real estate is a mortgage.