The legal right of a lender to take a borrower's property in order to secure payment of an obligation. For example, a bank assumes a security interest in a vehicle purchased by a customer using funds borrowed from the bank.
claim on assets or funds taken by a creditor to insure that a loan or debt will
be repaid. The security interest may be a portion of a property or asset for
which a loan was issued. If the borrower defaults, the pledged security
interest is the property of the buyer.
interest in property created by the operation of law or by agreement to repay a
loan; a lien on personal property created by an agreement.
purchase-money security interest
Interest taken by the collateral’s seller, such as an
automobile. It is a purchase-money security interest, created by a bank, allowing
one to pay off the cost of a car on an installment basis while enjoying its
use. The bank retains the title until the full amount (along with interest) has