Security Interests and Collateral
What Is a Security Interest?
A security interest is a legal right that allows a creditor to claim specified property, called collateral, if the debtor fails to repay an obligation. This arrangement reduces the lender's risk and often results in more favorable loan terms for the borrower.
Tip
Remember: no collateral means the creditor is generally unsecured.
Summary
A security interest connects a debt with specific property that serves as protection for the creditor.