200012 Lecture Notes - Lecture 26: Uniform Commercial Code, Security Interest, Property Law
3 May 2019
School
Department
Course
Professor
Document Summary
Security interest is a legal claim on collateral that has been pledged, usually to obtain a loan. The borrower provides the lender with a security interest in certain assets that can be repossessed if the borrower stops making loan payments. The lender can then sell the repossessed collateral to pay off the loan. A security interest is an enforceable claim or lien which gives a creditor the right to repossess all or part of a property secured as collateral for a loan. Securing interest on a loan lowers the risk for the lender and, in turn, allows the lender to charge lower interest, thereby, lowering the cost of capital for the borrower. A transaction in which a security interest is granted is called a secured transaction. Granting a security interest is the norm for loans such as auto loans, business loans and mortgages; these are collectively called secured loans. Credit cards, however, are classified as unsecured loans.
