secured transaction
A secured transaction is an arrangement in which a buyer or borrower (referred to as the debtor) guarantees payment of an obligation by granting a security interest in property to the seller or lender (referred to as the secured party).
The property in which the security interest exists is called collateral. This transaction creates a legal right for the lender to take possession of and sell the collateral if the borrower defaults on the loan or fails to meet the agreed-upon terms.
[Last reviewed in June of 2024 by the Wex Definitions Team]
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