Perfected Security Interest

A perfected security interest is a legal claim that a lender or creditor has on a borrower’s asset, ensuring they have priority if the borrower defaults. Achieving perfection involves completing specific steps—like filing paperwork or taking possession of the asset—so the security interest is publicly recognized and legally protected. This process helps the creditor establish their right to seize the collateral before others, providing security and reducing risk. In essence, perfection formally establishes a creditor’s priority rights over the collateral, offering greater confidence in recovering what’s owed.