Security Agreement

DEFINITION of 'Security Agreement'

A document that provides a lender a security interest in a specified asset or property that is pledged as collateral. In the event that the borrower defaults, the pledged collateral can be seized and sold. A security agreement mitigates the default risk the lender faces.

BREAKING DOWN 'Security Agreement'

Security agreements often contain covenants that outline provisions for the advancement of funds, a repayment schedule or insurance requirements. The borrower may also allow the lender to hold the collateral for the loan until repayment. Security agreements may also pertain to intangible property, such as patents or receivables.

RELATED TERMS
  1. Secured Note

    A type of loan that is backed by the borrower's assets. If a ...
  2. Side Collateral

    A pledge that partially collateralizes a loan. The pledge can ...
  3. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  4. Collateralization

    The act where a borrower pledges an asset as recourse to the ...
  5. Additional Collateral

    Additional assets put up as collateral by a borrower against ...
  6. Event Of Default

    An action or circumstance that causes a lender to demand full ...
Related Articles
  1. Credit & Loans

    What Is Collateral?

    Collateral is property or other assets that a borrower offers a lender to secure a loan. If the borrower stops making the promised loan payments, the lender can seize the collateral to recoup ...
  2. Trading Strategies

    How Does Securities Lending Work?

    Securities lending is the act of loaning a stock or other security to an investor or firm.
  3. Credit & Loans

    Come In With Collateral

    You need a loan during a market downturn but lenders are not co-operating. Don't give up; follow this guide to become an ideal borrower.
  4. Credit & Loans

    What are the Five C's of Credit?

    The five C’s of credit are what banks and other lenders evaluate about a potential borrower when making a lending decision. The five C’s are Character, Capacity, Capital, Collateral and Conditions. ...
  5. Credit & Loans

    What Does a Lender Do?

    A lender provides funds to another with the expectation those funds will be repaid with interest.
  6. Home & Auto

    What Is A Mortgage?

    A mortgage is a loan used to purchase a home, where the property serves as the borrower's collateral.
  7. Professionals

    The Uniform Securities Act (USA) - Definitions Part 6

    FINRA/NASAA Series 63 - The Uniform Securities Act (USA) - Definitions Part 6. This section defines and explains the term "sale".
  8. Economics

    What Happens in a Default?

    Borrowers are in default when they don’t honor a debt, whether their failure is intentional or not.
  9. Entrepreneurship

    Using Collateral to Obtain a Loan for Your Small Business

    Learn what assets can be used as collateral for an asset-based loan, and find out best practices when seeking asset-based lending.
  10. Credit & Loans

    Contrasting Non-Recourse And Recourse Loans

    The difference between a recourse and non-recourse loan involves how aggressively a lender can pursue a borrower who defaults on the loan.
RELATED FAQS
  1. When did people first start using collateral to secure loans?

    Read about the history of lending and collateral, including a time when an entire nation was pledged as collateral for all ... Read Answer >>
  2. What is a collateral assignment of life insurance?

    Learn about collateral assignment of life insurance so you can make a wise decision about what kind of collateral to use ... Read Answer >>
  3. What is the difference between secured and unsecured debts?

    Learn the differences between secured and unsecured debt; discover how banks buffer risks associated with each type of loan ... Read Answer >>
  4. What is the difference between asset-based lending and asset financing?

    In the most common usage, the terms "asset-based lending" and "asset financing" refer to the same thing. Asset-based lending ... Read Answer >>
  5. Do all banks use the Five Cs of Credit when evaluating potential borrowers?

    Understand how lenders analyze a new credit application from a borrower, and learn why the five Cs of credit are an important ... Read Answer >>
  6. What is the most important "C" in the Five Cs of Credit?

    Learn how the five C's of credit affect new credit application decisions, and understand how a lender analyzes each aspect ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center