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TYPES OF COLLATERAL & TYPES OF CHARGES
What is collateral security in the context of bank lending?
Collateral security is an additional security offered by a borrower to a bank over and above the primary security, to provide the bank with a fallback in case of default.
What is the meaning of the term 'charge' in the context of bank lending?
A right created over an asset to secure repayment of a debt.
What is the difference between primary security and collateral security?
Primary security is the asset created from the loan proceeds (e.g., machinery purchased with term loan), while collateral security is additional security like land or a third-party guarantee pledged separately.
What is a fixed charge in the context of lending?
A charge attached to specific identified assets of the borrower.
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