Primary Security VS. Collateral Security
Anyone who is in need of loan from a bank or any other financial institution has to put some security against taking loan. The security might be kept with the lender or the customer (borrower) on the basis of the type of security.
You can read different types of securities from here.
These securities are generalized in two types:
- These are the assets directly related to your business or project for which you have taken a loan and kept that as security.
- So a primary security can be the thing that is being financed.
- For example: a factory for which u have taken loan and kept that as security, taken loan for a car and kept that as security, etc.
- These are any assets other than primary securities, which are kept as security against taking credit or a loan.
- It can also be issued by a third party or any intermediary.
- For example: taking a personal loan and mortgaging your house, hypothecation of jewellery against any loan, etc.