Security Interest | Propertylogy

Security Interest

By on July 27, 2019

A security interest is an interest in an asset a party has in which the asset serves as a collateral.

While security interest is not limited to lenders and borrowers in the arrangement of loans and debt, the most common security interest we see today are those for consumer loans such as mortgages or auto loans.

A mortgagee would be deemed to hold a security interest in a house as it is the collateral for the debt.

However, it must be noted that a lender does not own the house, but has a priority lien against it.

In the event of default, the lender would have the legal right to seize the real estate and put it on sale. The sales proceeds would then be used to settle the outstanding debt and the remaining balance returned to the debtor.

Other types of assets parties might have a security interest in include, cash or cash equivalents, stocks, equipment, antiques, artwork, etc.

It should not be confused with a security instrument.

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