Security Agreements Nz

Security Agreements in NZ: Understanding the Basics

In New Zealand, security agreements are important legal documents used to secure loans or credit facilities. These agreements outline the terms and conditions of the loan and identify the assets that will be used as collateral. This collateral could be anything from a car or house to business assets or even future income.

If you are planning to take out a loan or credit facility, it`s important to understand the basics of security agreements in NZ. Here are some key things you need to know:

What is a Security Agreement?

A security agreement is a legal contract that sets out the terms and conditions of using collateral to secure a loan or credit facility. It is a binding agreement between the borrower and the lender that outlines the conditions under which the lender can take possession of the collateral in the event of a default.

Why are Security Agreements Important?

Security agreements are important for lenders because they provide assurance that the loan will be repaid. By securing the loan with collateral, lenders reduce their risk and can offer lower interest rates and better terms. For borrowers, security agreements can make it easier to obtain credit, even if they have a poor credit history.

What Assets Can be Used as Collateral?

In NZ, almost any asset can be used as collateral, including property, vehicles, equipment, inventory, and even future income. However, different lenders have different requirements for collateral, and some assets may be more difficult to use than others. For example, lenders may require a valuation report for property or equipment, or may refuse to accept certain types of assets, such as livestock.

What are the Obligations of the Borrower?

As a borrower, you have certain obligations when you enter into a security agreement. These typically include making payments on time, complying with any conditions of the loan, and maintaining the collateral in good condition. If you default on the loan, the lender may take possession of the collateral and sell it to recover their losses.

What are the Risks of Security Agreements?

Although security agreements can be a valuable tool for obtaining credit, they do come with certain risks. For example, if you default on the loan, the lender may sell your collateral for less than it is worth, leaving you with a debt that is greater than the value of the asset. Additionally, if you use property as collateral, you may be at risk of losing your home or other assets if you are unable to make the payments.


If you are considering taking out a loan or credit facility in NZ, it`s important to understand the requirements and risks associated with security agreements. By carefully reviewing the terms of the agreement and selecting the right collateral, you can reduce your risk and obtain credit on favorable terms. If you have any questions or concerns, it`s always best to consult with a legal professional or financial advisor before entering into the agreement.