Loan and Security Agreement

Last Updated: Jun 7, 2019

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A loan agreement is a contract between a borrower and lender that outlines the mutual promises made by each party. A security agreement provides a lender with a security interest in a specified asset or property that is pledged as collateral. Therefore a loan and security agreement combines both. In the event that the borrower defaults according to the terms of the agreement, the pledged collateral can be seized and sold according to the terms outlined. A security agreement mitigates the default risk the lender faces.