Types of security

Introduction to security

The main advantages in taking security from a borrower are to give the creditor:

1. •

   rights against specific assets of the borrower if the borrower has insufficient assets to meet the claims of all its creditors

2. •

   priority over other creditors of the borrower in receiving payment

3. •

   a more efficient way of recovering claims against the borrower, and

4. •

   the right to appoint an administrator or receiver over the assets of the borrower, if certain conditions are met

For introductory information on security, see Practice Note: Introductory guide to security in a lending transaction.

For links to information addressing frequently asked questions on security issues, see Practice Note: Security—frequently asked questions.

Main types of security

English law recognises four types of security interest: mortgages, charges, pledges and liens. Each type of security has different characteristics and grants different types of rights to creditors:

1. •

   Mortgages—a mortgage is created by the transfer of legal and/or beneficial ownership