A borrower offers a guarantor to a lender as additional security for a mortgage. This is referred to as what type of security?

• A. Prime.
• B. Collateral.
• C. Fixed.
• D. Legal.

Answer: (B)

The main idea is how lenders secure a loan beyond the borrower’s own assets. A guarantor’s promise to cover the debt if the borrower defaults provides additional security for the lender. This kind of backing is treated as collateral security because it strengthens the lender’s recourse and protection, even though it isn’t a pledged asset like a property. The guarantor’s obligation acts as a backstop that can be pursued if needed, which is exactly what collateral does. The other terms don’t describe security arrangements: a prime relates to loan pricing, fixed to the loan’s interest structure, and legal is too vague to describe a security type.