Types of security

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This overview is a guide to the Banking & Finance content within the Types of Security subtopic, with links to the appropriate materials.

Introduction to security

The main advantages in taking security from a borrower are to give the creditor:

  1. •

    rights against specific assets of the borrower if the borrower has insufficient assets to meet the claims of all its creditors

  2. •

    priority over other creditors of the borrower in receiving payment

  3. •

    a more efficient way of recovering claims against the borrower, and

  4. •

    the right to appoint an administrator or receiver over the assets of the borrower, if certain conditions are met

For introductory information on security, see Practice Note: Introductory guide to security in a lending transaction.

For links to information addressing frequently asked questions on security issues, see Practice Note: Security—frequently asked questions.

Main types of security

English law recognises four types of security interest: mortgages, charges, pledges and liens. Each type of security has different characteristics and grants different types of rights to creditors:

  1. •

    Mortgages—a mortgage is created by the transfer of legal and/or beneficial ownership

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