One common example is the residential mortgage or deed of trust. In many cases, the asset that is acquired by the borrower secures the borrower’s obligation to pay for such asset. In other words, as a condition to obtaining the loan, the borrower agrees to the pledged asset as security for the loan and that the borrower can take the asset in the event of default.Ī consensual lien is typically a result of a loan or other advance of credit. When a creditor is a secured creditor, the creditor has a consensual lien against the asset securing the debt. If the buyer of the car or home stops making payments on the loan and defaults, the creditor’s security is the car or the home and the creditor can repossess the car or take title to the home and then sell the asset to satisfy the amount of the outstanding debt.Īn unsecured creditor does not have any rights to a specific asset to satisfy an outstanding debt in the event of default. This is typical with a car loan or a home loan. That means that the parties agreed that, if a default occurs, the creditor can take possession of the specific asset to satisfy the debt. Secured creditors have a claim against one or more specific assets of the debtor. Creditors (someone who is owed money from a borrower) come in two categories: secured and unsecured.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |