I have a bit of an idea of what it includes and some of its features, but if someone asked me what it meant I’d have no answer for them.
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Much appreciated guys. This was very helpful!
In: Economics
A loan can be “secured” or “unsecured” meaning it has collateral, a house loan is “secured” against the house, if the borrower doesn’t pay, they take the house and sell it.
An unsecured loan is like a credit card. There’s no guarantee over the “word” or credit of the borrower.
Given a large enough bank they have a requirement to keep at least a percentage of the money on hand ( not loaned out at all) to cover when some one wants to make a withdrawal, and at least a certain amount as loans “secured” by actual property. The rest the bank can invest on unsecured loans. If a bank makes too many “unsecured loans” it could fail if they all went bad, so the bank might sell or trade some loans for a loan that is less risky or “secured”.
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