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ARTICLE · 07 APRIL 2020

Secured Financing

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Secured creditors have greater options than unsecured borrowers in insolvency.

NigeriaFinance and Banking
Abimbola-Ifeoluwa Okunmadewa
Abimbola-Ifeoluwa Okunmadewa

1.0 INTRODUCTION

Taking security when giving a loan ensures that a creditor gets paid in full, he avoids the effects of "paripassu" distribution; that is he has priority over other creditors in the insolvency of the Borrower. Secured creditors have greater options than unsecured borrowers in insolvency. From the Borrower's perspective giving security an incentive for a loan would allow him to borrow at a cheaper interest rate.

2.0 ATTRIBUTES OF A GOOD SECURITY

  1. A Lender will generally be concerned that the security offered is effective generally (it will motivate the borrower to repay the loan) as well as in the insolvency of the borrower.
  1. The security should ensure that the Lender takes priority over any other person that has an interest in the secured asset

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