Which of the following best defines a secured loan?

A secured loan is best defined as a loan backed by an asset. This means that the borrower provides collateral to the lender, which serves as a guarantee for the loan. If the borrower fails to repay the loan, the lender has the right to take possession of the asset that was pledged as collateral. This structure reduces the risk for the lender and often results in lower interest rates for the borrower compared to unsecured loans, which do not have collateral backing them.

In contrast, loans without collateral (like personal loans) are considered unsecured and carry higher risks for lenders, often resulting in higher interest rates. A personal loan with high interest is just a specific type of unsecured loan and does not reflect the secured nature of the loan in question. Similarly, a credit card balance represents revolving credit and does not involve collateral, making it distinct from secured loans.