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Security Interest

A security interest is a legal claim on collateral that a lender has in case a borrower fails to repay a loan. It helps protect the lender's investment by giving them rights to the collateral—usually property or assets—if the borrower defaults. For example, if you take out a loan to buy a car, the lender might keep a security interest in the vehicle. This means if you don’t make your payments, the lender can repossess the car to recover their losses. It's a way to ensure that lenders have a financial backup plan.

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    A security interest is a legal claim or right that a lender has over a borrower's asset. It ensures that if the borrower fails to repay a loan, the lender can take possession of the asset to recover the owed money. For example, if you take out a mortgage to buy a house, the bank has a security interest in the house. This means if you don’t make your mortgage payments, the bank can foreclose on the property. Essentially, a security interest protects the lender's investment by giving them a way to recover their funds.