What is a Security Agreement
Security Agreement is a piece of document that provides a money-lender a security interest over a particular asset that is vowed as a security.
The security or collateral is the property that secures a loan.
On default by the borrower, the money lender can seize and sell the property that is pledged as Collateral security.
Drafting
Promissory Note Vs Security Agreement
1. Promissory Note is signed for a small sum of loan and it is done in two ways that is Secured and unsecured. But whereas the Security agreement means only a secured agreement with a collateral security.
2. On default, the money lender had to approach the court by way of a recovery suit. But whereas in case of security agreement, the lender can sell the property and can recover the outstanding money.
Promissory Note Vs Security Agreement
- Promissory Note is signed for a small sum of loan and it is done in two ways that is Secured and unsecured. But whereas the Security agreement means only a secured agreement with a collateral security.
- On default, the money lender had to approach the court by way of a recovery suit. But whereas in case of security agreement, the lender can sell the property and can recover the outstanding money.
Essentials of Security Agreement
Secured interest: The borrower must explicitly grant a secured interest over the property pledged. This is called the Collateral.
Loan details: The specific sum of money that is lend to the borrower by the lender must be mentioned very clearly.
Describe the Collateral: The subject matter of the security agreement which is nothing but the collateral must be defined properly.
Warranties and Covenant of Debtor: If the warranty turns into default, the money lender can sue the borrower.
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