A security agreement is a legal document that outlines the security interest as a collateral for a loan which is either in asset or property, between a lender and a borrower. If a transaction includes a security agreement then it's called a 'secure transaction'.
What is in a security agreement?
Debts are common in most growing businesses, almost all individuals and organizations need finances for various reasons, finding this sources of finances can be a hassle as such many individuals and organizations tends to secure a loan to get access to such finances. When securing a debt a collateral might be needed before the loan is being granted. A security agreement outline the terms and conditions under which a debt are secured and state the consequences if a borrower defaults on payment. The security interest provides:
- Assurance to the creditor to grant the loan.
- Lower interest rate.
- Protection to the creditor in case debtor default on the payment.
A couple of terms that may be included in a security agreement are listed below:
- Warranties: The include terms and conditions agreed on by both the borrower and lender.
- Collateral Description: The asset or property that is being held as collateral should be describe in details which should include the specific listing, quantity, category, description type etc.
- Types of collateral: There are different types of collaterals which includes farm products, property, inventory, bonds etc. This should be clearly stated.
- Security Interest: Security interest attachment must be stated, value must be exchanged by the two parties, the debtors must have a right to the collateral and the debtor must sign the security agreement.
- Priority: Some transactions may include multiple parties, in such cases priority must be set for the parties involved.
- Default: Any things that will be considered as default must be stated, this can include theft of the collateral, improper use of the collateral, failure to abide by any obligation or if the collateral is false.
- Remedies: This section provides remedy for creditors to recover losses in case of any default from creditors.
If you need a security agreement template and do not know where to look then do not panic! We have made this task quick and easy for you with our free downloadable security agreement template. Just download and fill in your information for easy use. Get this printable file now and personalize it according to your needs and check out more free templates on our website.
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