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Business Definition for: security interest
Dictionary of Banking Terms
security interest

lender's claim to assets pledged by a borrower securing payment of an obligation. A lender's interest, also known as a lien , is said to attach to the borrower's property, and consists of two limited rights: foreclosure and priority. A lender who files a financing statement , which is often the same document as the security agreement , with the appropriate state or county official gives legal notice to other creditors that a lien has been filed. This process, known as perfecting a lien, commonly is done in commercial lending of a lien that is valid against claims of other creditors and most third parties.

See also perfected lien
Dictionary of Real Estate Terms
security interest

an interest in real estate in which the real estate serves as collateral .

Example: A mortgage lender holds a security interest in real estate. He doesn't own the real estate, but does have a lien against it.

Dictionary of Business Terms
security interest

interest in real property or personal property that secures the payment of an obligation. In common law, security interests are either consensual (by agreement) or arise by operation of law, as in the case of judgment liens and statutory liens.

Related Terms:
perfected lien

security interest in collateral securing a debt protected from claims by third parties. To properly file a lien and take a security interest in property owned by the borrower, a lender must file the lien with the appropriate legal authority. Perfection of a lien on real estate is accomplished by recording the mortgage deed of trust in public land records of a municipality, such as a town clerk's office.

Perfecting a lien on stocks, bonds, or other assets owned by the borrower (known as personal property, as opposed to real property, or real estate) occurs when the lender files a financing statement listing the type of collateral securing the loan, and its location, in a designated filing place, generally the office of the Secretary of the State or a county recorder's office.

The lender's financing statement gives the lender priority status ahead of creditors filing subsequent liens, and is valid for a five-year period. The filing date is recorded, and the lender's documents are assigned a file number. These documents contain a detailed record of the collateral pledged or taken by the lender, establishing the lender's claim against assets by the borrower in event that the borrower defaults or goes bankrupt.

Referring Terms:
accounts receivable financing
collateral
collateral loan
commercial and industrial (C&I) loan
lien
start-up financing
term loan
Uniform Commercial Code (UCC)
Copyright c 2006, 2000, 1997, 1993, 1990 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
 Copyright © 2004, 2000, 1997, 1993, 1987, 1984 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
 Copyright © 2007, 2000, 1997, 1987, by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
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