A security interest is a legal claim that a lender has on a borrower's asset, which serves as collateral for a loan. This means that if the borrower fails to repay the loan, the lender has the right to take possession of the asset to recover the owed amount. Common examples of collateral include property, vehicles, or equipment. In many cases, a security interest is formalized through a written agreement, often referred to as a security agreement. This document outlines the terms of the loan and specifies the collateral involved. The process of creating and enforcing a security interest is governed by laws, such as the Uniform Commercial Code (UCC) in the United States.