Try it risk-free When a debtor borrows money, the credit transaction can be secured or unsecured.
A secured transaction is any deal in which a creditor receives a security interest in the debtor's property. The secured party holds a security interest in the debtor's property in order to ensure the debtor's payment. Credit transactions involving large ticket items, such as cars, homes or appliances, are usually secured.
Because the debtor has a lot at stake, secured transactions must meet several requirements before the creditor's interest in the collateral can be legally enforceable.
The collateral becomes an enforceable part of the transaction only after the security agreement meets certain requirements.
If my home is seized and sold, the money will first go toward paying my mortgage company.
Other creditors will be in line behind my mortgage company.
In this case, the security interest is perfected when attachment occurs.
If the debtor fails to make payments when due or otherwise fails to fulfill the terms of the security agreement, it's known as a default.
Security interests are often given in exchange for the same property for which the debtor borrowed the money, but this isn't always the case.
Just note that the security interest must be capable of covering the loan.