Security interest

A security interest is a legal claim on collateral. The collateral can be real estate, personal property or any asset. Collateral is usually used to secure a loan.^[1]

The borrower is the party who borrows the funds. The lender is the one who lends the money in return for a security interest. The lender can repossess the asset if the borrower fails to repay the loan. The lender can then sell the asset to repay the loan.^[1] A loan secured by collateral is called a secured loan (also called a lien). A loan with no collateral (such as a credit card) is an unsecured loan. There is nothing for the lender to repossess.

1. ↑ ^{1.0 1.1} "Security Interest". Investopedia. Retrieved 27 October 2015.