Cash, Loans, Debts, and Promises

Cash, Loans, Debit, Promises: Lesson 5


  • if you have no credit history but need a loan, you may be able to use collateral to help get a loan.
  • Collateral is something valuable that belongs only to you that a creditor can have in case you don’t pay a loan from the creditor.
    • You and the creditor both must agree to this.
  • Example: you own your car free and clear. You want a loan but don’t have much credit history yet, so you use the value of your car to secure the loan. It is now called “collateral” for the loan.
    • The creditor becomes a lienholder (like a co-owner) on your car.
  • Let’s say you make three loan payments and lose your job. You can’t make payments right now. The lienholder (the creditor) sends a tow truck and takes your car. The creditor sells your car at an auction to get their money.
    • If the creditor doesn’t get enough to pay your loan, they can then come after you for the unpaid balance.
Create an Account

Already have a user account?


When you become a member of our site, you will have full access to all of our courses and quizzes. Plus, you'll have access to any new courses and quizzes that we add during your membership. You will also be enrolled in our members-only newsletter where we share additional information exclusively for you. Sign up now and start educating your teens and young adults on how to stay out of legal trouble and have a brighter future.