|
Q.Why is Perfecting a security interest important?
A.A loan may be unsecured or secured by collateral. If a loan is unsecured and the borrower defaults, the lender's sole remedy is to sue the borrower for the amount owed. However, if the borrower defaults on a secured loan, the lender holds the additional option of foreclosing on the collateral. The lender may then sell the foreclosed property to repay the debt or kept it satisfaction of the debt. If the value of the collateral is less than the outstanding debt, some states allow the lender to sue for the outstanding amount. A home loan is an example of a secured loan.
Perfecting the "Security Interest" in personal property is important to prevent the debtor's other creditors from attaching the collateral that secured the loan. A secured party's security interest in personal property (the collateral for the loan) is not protected against a debtor's other creditors unless it has been perfected. A security interest is perfected when all of the applicable steps required for perfection, such as the filing of a financing statement or possesion of the collateral with the appropriate state or local authorities, have been taken. UCC § 9-303(1). These provisions are designed to give notice to others of the secured party's interest in the collateral, and offer the secured party the first shot at the collateral if the need to foreclose should arise. If the security interest is not perfected, the secured party loses its secured status.
business credit line, line of credit, business line of credit, small business loan, small business loans, business loans, business loan, security interest, ucc, creditor taking a security interest, take security interest, prefect security interest
|
|
