Types of security
Types of security

The following Banking & Finance practice note provides comprehensive and up to date legal information covering:

  • Types of security
  • What is security?
  • Why do lenders take security?
  • Types of security
  • Distinction between legal and equitable security
  • Mortgages
  • Assignments by way of security
  • Charges
  • Charges—fixed or floating
  • Pledges
  • More...

A lender's primary concern is that it is repaid. Even if a lender obtains a judgment for payment of the sum owed to it by its borrower, this does not mean that a lender will be repaid in full or even in part, eg if the borrower is insolvent, the lender may have to share the borrower's available assets with other creditors and only receive part of what it is owed as a result.

Lenders will often take security as support for a borrower's obligations under a loan. Taking security means that they will have certain rights over the secured assets in the event that the borrower fails to repay the loan.

This Practice Note explains:

  1. what security is

  2. why lenders take security

  3. the key features of the four types of security recognised under English law

  4. the distinction between legal security and equitable security

What is security?

A security interest confers rights in the security provider's assets in favour of the secured party as security for its own or a third party's obligation. The nature of the rights conferred by a security interest will depend on the type of security taken.

Security is different to quasi-security which only creates rights against a person (see Practice Note: Difference between security and quasi-security).

Why do lenders take security?

The main advantages to a lender in taking security from a security provider are

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