Security Loan

Security Loan

With reference to lending, security or collateral, is an asset that is pledged by the borrower as protection in case he or she defaults on the repayment.

Under the loan agreement, the lender could have the right to take ownership of the asset in place of the repayment, or he or she might have the right to insist that the asset is sold to repay the outstanding loan and interest (and perhaps other unpaid expenses), with the remainder of the proceeds returned to the borrower.

Security should be important to the lender, whether the borrower is an individual, or a company.