Legal Question in Credit and Debt Law in Pennsylvania

I am attempting to write up a promissory note using a template I've found from another website. When I selected to secure the note using a security (A vehicle), the following provision is incorporated into the note, which I do not fully understand.

The Borrower grants to the Lender a security interest in the Security until this Note is paid in full. The Lender will be listed as a lender on the title of the Security whether or not the Lender elects to perfect the security interest in the Security.

Could you please explain this paragraph, keeping in mind that the "security" is the borrowers vehicle? What action does this paragraph require? And if it requires action, when does the action need to be completed? Before or after the borrower signs the note?


Asked on 8/17/15, 10:02 am

1 Answer from Attorneys
Rachel Hunter

This is why people should not do things themselves.

This is not a law school exam. When a loan is secured by something, could be a car, usually the note is accompanied by a security agreement and the lender is listed as a lien holder on the title. So the borrower has to actually HAVE the car title in his or her possession. To be safe, you the lender should complete the lien information and take the title to the DMV (have any other documents completed by the borrower, like an application for a title) and there will be fees for this so make the borrower pay those too. The DMV then issues a new title and sends it back to you with the lien recorded on it which you hold until the loan is repaid. If the borrower does not pay, you come and get the car and can sell it.

I would pay an attorney to draft the security agreement and promissory note for you or else pay an attorney to review whatever you have and make sure it is consistent with Pennsylvania law.

Read more
Answered on 8/17/15, 11:18 pm


Related Questions & Answers

More Credit, Debt and Collections Law questions and answers in Pennsylvania