security deposit account

A security deposit account is a special bank account used to hold a deposit made by a tenant to a landlord or by a borrower to a lender. This deposit serves as security for potential defaults, damages, or unpaid dues. The funds remain in the account during the lease or loan period and are usually returned or adjusted at the end, minus any deductions for damages or unpaid amounts. It provides reassurance for the property owner or lender that financial obligations will be covered if issues arise, ensuring both parties have a clear understanding of the security arrangement.