Collateral

The types of securities are as follows:
• security deposit
• lien
• suretyship and guarantee
The security deposit is a form of financial collaterals. If security deposit is offered for the insurance of an obligation, the holder can satisfy his claim directly from the amount of security deposit in case of non-compliance or non-contractual compliance of the contract. The holder may not use the object of the security deposit, it has to be separated from his assets and it may be used only for the purpose of satisfaction. If the contract signed for the underlying collateral are fully satisfied, the security deposit is refunded to the obligor. The security can be marketable and less marketable collateral.
Absolute marketable: cash, government, banking securities, fixed-term foreign exchange or deposits. Less marketable securities are: listed securities, bills of a first-class debtor.
The lien is a physical collateral. Its key objective is that the debtor should provide coverage to satisfy the deferred claims becoming due later, with property tied up in advance. If the debtor is unable to repay his debt, the holder can secure his claim with the realisation of the pledge being used to ensure the claims. Satisfying claims using the pledged item is usually based on a court decision, by way of compulsory execution. After completing the contractual obligations of the debtor, the lien on the pledged item is automatically terminated.
The most common type of lien is the mortgage. To create a mortgage, the pledge agreement is required to be out down in writing and the mortgage is required to be received in a public register (of mortgages). The subject of mortgage may be real estate, vehicles, and tangible assets. In case of real estates, records are done by the Land Registry. The pledged property remains in the possession of the owner, (s)he is intended to use all the while, but he has to ensure the preservation. We know pledge, when the transfer of the pledge is also required in addition to the mortgage contract. The transfer of the pledge can happen to a third person (chattel mortgage holder)
In case of suretyship, the surety is a person, who obliges to pay if the original debtor cannot. If the principal obligation is not enforceable judicially, the surety cannot be enforced, either.
In case of guarantee the bank pays a fee to the guarantor, who secures repayment of the loan if the original debtor defaults. The difference between the surety and the guarantor is that the former is brought into the business by the the debtor. The guarantee is an independent obligation, which means that it is a payment promise independent from the principal obligation. So it is indifferent why the obliged does not perform, the guarantee is obliged to accomplish if the obligor of the underlying transaction is innocent in the breach of contract.