Security Interest

[si-KYUR-i-tee IN-trest]

What is the definition of Security Interest?

A legal interest granted in an asset to secure the performance or payment of an obligation by a debtor to a creditor.

Using Security Interest in an Example

In a typical car loan arrangement, the lender (creditor) will hold a security interest in the vehicle (asset) until the borrower (debtor) has fully repaid the loan. If the borrower fails to make the payments, the lender has the right to repossess the vehicle to recover the owed amount.

Using Security Interest in a sentence

The bank holds a security interest in the equipment financed for the factory to ensure that the loan payments are made on time.

Related Terms

Surviving Spouse

A person whose spouse has died within the tax year and who may file a joint tax return for that year. Additionally, the surviving spouse can file joint returns for the next two years if they remain unmarried and maintain a household as the principal residence for a dependent child.

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Swap

A financial contract in which two parties agree to exchange streams of payments over a specified period, based on different indices such as interest rates, foreign exchange rates, or equity indices, applied to a notional amount. Swaps typically do not involve the exchange of principal.

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