Security interest

Part of a series on
Finance
Markets Assets Asset (economics) Bond Asset growth Capital asset Commodity Derivatives Domains Equity Foreign exchange Money Over-the-counter Private equity Real estate Spot Stock Participants Angel investor Bull (stock market speculator) Financial planner Investor institutional Retail Speculator Locations Financial centres Offshore financial centres Conduit and sink OFCs
Instruments Bond Cash Collateralised debt obligation Credit default swap Time deposit (certificate of deposit) Credit line Deposit Derivative Futures contract Indemnity Insurance Letter of credit Loan Mortgage Option (call exotic put) Performance bonds Repurchase agreement Stock Security Syndicated loan Synthetic CDO
Corporate General Accounting Audit Capital budgeting Capital structure Corporate finance Credit rating agency Enterprise risk management Enterprise value Risk management Financial statements Transactions Leveraged buyout Mergers and acquisitions Structured finance Venture capital Taxation Base erosion and profit shifting (BEPS) Corporate tax haven Tax inversion Tax haven Transfer pricing
Personal Credit / Debt Employment contract Financial planning Retirement Student loan
Public Government spending Final consumption expenditure Operations Redistribution Transfer payment Government revenue Taxation Deficit spending Budget (balance) Debt Non-tax revenue Warrant of payment
Banking Central bank Deposit account Fractional-reserve Full-reserve Investment banking Loan Money supply Lists of banks Bank regulation Banking license Basel Accords Bank for International Settlements Financial Stability Board Deposit insurance Separation of investment and retail banking
Regulation · Financial law International Financial Reporting Standards ISO 31000 Professional certification Fund governance
Economic history Private equity and venture capital Recession Stock market bubble Stock market crash Accounting scandals
Outline Business and Economics portal Money portal
v t e

In finance, a security interest is a legal right granted by a debtor to a creditor over the debtor's property (usually referred to as the collateral^[1]) which enables the creditor to have recourse to the property if the debtor defaults in making payment or otherwise performing the secured obligations.^[2] One of the most common examples of a security interest is a mortgage: a person borrows money from the bank to buy a house, and they grant a mortgage over the house so that if they default in repaying the loan, the bank can sell the house and apply the proceeds to the outstanding loan.^[3]

Although most security interests are created by agreement between the parties, it is also possible for a security interest to arise by operation of law.^[4] For example, in many jurisdictions a mechanic who repairs a car benefits from a lien over the car for the cost of repairs. This lien arises by operation of law in the absence of any agreement between the parties.

Most security interests are granted by the person who owns the property to secure their own indebtedness. But it is also possible for a person to grant security over their property as collateral for the debts of another person (often called third party security).^[5] So a parent might grant a security interest over their home to support a business loan being made to their child. Similarly, most security interests operate to secure debts or other direct financial obligations. But sometimes a security is granted to secure a non-financial obligation. For example, in construction a performance bond may secure the satisfactory performance of non-financial obligations.

The different types of security interest which can arise and the rights which they confer will vary from country to country.^[6]