When a lender and borrower enter in a deal that involves money/loan, interest and repayment of the loan, there are always some chances and possibilities that one of them might not stick to the rules and conditions as provided and agreed by both of them. In order to secure the rights and protect their assets, the lender or the financial firm requires some kind of security from the borrower which is most likely a real estate property that the bank pledges or in simple words, keeps as security of safe return of loan from the borrower. The agreement that is signed by the lender and borrower to pledge the property is known as the security agreement.
Brief Description of Security Agreement:
Most companies and individuals prefer not to get any kind of loan until they need it the most and there is no other option. When this happens, there are dozens of financial firms and banks in each country and city that help the companies and individuals with their financial helps with granting loans. The person or bank that gives the loan is known as the lender or creditor and the person or company that takes the loan is known as the borrower or debtor. When a company or business agrees to get the loan, they also agree to return it in small installments with specific rate of interest. It is very important to understand that no matter how willing the company or individual are to pay back the debt, the bank or financial firms don’t put their resources in jeopardy and take essential steps to make sure that the debt will be returned.
In most cases, a guarantor is required to get the loan from a bank but some banks and financial firms also pledge real estate property as the security for the safe return of the debt. This means that if you want to get a loan, you have to put your property in pledge with the bank so that if you can’t give back the loan, the bank will auction the property and clear their debt where on the other hand, if you safely return the debt, the property will be returned to you with full rights and ownership. The security agreement is the legal document that is signed between the bank and debtor that includes the details of the property and permission from the owner to pledge the property with the bank.
Here is preview of a Free Sample Security Agreement Template created using MS Word,
Key Elements to add in the Security Agreement:
- Name of the lender/financial firm/bank
- Name of the borrower/debtor/individual or company
- Details of loan with interest rates
- Duration in which the borrower will return the loan
- Details of installments or periodic payments of the loan
- Details of the property given to lender as security of loan
- Rights of the lender on the property in case of default debt
- Responsibilities and rights of each party
- Terms and conditions of the agreement
- Mutually agreed clauses of the agreement
- Termination of the agreement
- Results of violation of the agreement
- Validation and limitations of the agreement
- Signature of both parties with witnesses
Here is download link for above shown Security Agreement Template,