When to use Security Agreement
In general, contracts need to represent a relatively fair exchange of goods, services, property or other assets. Practically speaking, this means that contracts may not be considered legally enforceable if one side of the bargain is significantly more burdened than the other. For example, if you put your house up for sale and that house had a market value of $1 million but a buyer purchased your house for $30,000, a court might be suspicious that coercion, fraud or other illegal forces influenced that sale contract. If a contract is too lopsided, it may not be valid. It is partially for this reason that many lenders, both commercial and private, insist that high-risk borrowers (and/or borrowers receiving terms that are far more favorable than their financial situation would warrant) put up collateral in order to “even the playing field.” By offering personal property up as a way to guarantee that the lender will be repaid in some form, a contract can be more balanced than it otherwise might be.
If you are planning to loan an individual or business money but you will feel more secure in finalizing the arrangement if collateral is offered, you can use this security agreement template to outline the terms of the collateral in question. Similarly, if you are hoping to secure financing, but the terms of the loan are more favorable to you than the lender and that makes the lender skittish, you can use this security agreement template in order to offer collateral designed to strengthen your position within the lending relationship. This document can help you to detail the terms associated with this balancing influence.
Security Agreement Form