Secured Transaction Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Secured Transaction, written in plain English, along with examples of how it is used.

What is Secured Transaction?

History and Meaning of Secured Transaction

A secured transaction refers to a type of lending or rental agreement where the borrower provides collateral to the lender or lessor to guarantee the return of the property or article. This type of transaction is common in financial and commercial settings, as it reduces the risk for the lender or lessor by ensuring that they have a way to recover their investment in the event of default or non-payment.

The concept of a secured transaction has been around for centuries, dating back to ancient civilizations where merchants would use their goods as collateral to borrow money for trade. In the modern era, secured transactions are governed by legislation and regulations that outline the specific requirements and procedures for creating and enforcing these types of agreements.

Examples of Secured Transaction

1. A business takes out a loan from a bank and pledges its real estate holdings as collateral to secure the loan's repayment.
2. An individual leases a car and offers their existing vehicle as collateral to guarantee that they will return the leased car at the end of the contract.
3. A company purchases new equipment from a vendor and agrees to make payments over time, with the equipment itself serving as collateral for the vendor's security.

Legal Terms Similar to Secured Transaction

1. Collateral - the property or asset that is pledged or provided as security in a transaction.
2. Lien - a legal claim on a property or asset that serves as security for a debt or obligation.
3. Uniform Commercial Code (UCC) - a set of laws that governs commercial transactions in the United States, including secured transactions.