When loaning money to a borrower, many lenders ask to hold some collateral to secure the borrower’s repayment of the debt. In non-real estate transactions, the borrower must provide the lender a Security Agreement and UCC-1 (and sometimes even possession of the item) in addition to the promissory note, in order for the lender to obtain an effective security interest in the item of collateral. The UCC-1 must be filed with the Secretary of State in order to perfect the security interest in non-real estate collateral. As for the promissory note, the parties should address issues related to payment terms, interest rate, late fees and prepayment penalties, among other issues. The Note is signed by the borrower, but does not have to be filed of record. The lender should retain possession of the original Note, and return it marked “Paid in Full” upon full payment.
Documents to be prepared for you: “Follow-Through” Instructions, Promissory Note, Security Agreement, UCC-1.