A security agreement is a formal document created by a lender or a borrower whereby the borrower guarantees that he will repay the loan in full or in part by adding a property, automobile or investment account etc in the agreement as security or collateral. This ensures that even if the borrower defaults and is not able to pay the whole or part of the amount, the lender has the right to use the security and sell it and keep the money for himself.
A security agreement must clearly mention the names and contact details of the borrower and the lender, the amount of money loaned, the date of signing the contract and the term within which the loan has to be returned, the rate of interest and mode of payment. The next most important thing to be mentioned is the description and value of the security or collateral and that the borrower has ownership of the collateral.
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Sample Security Agreement
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