Perfection of security interest

[LiLRiceBoi]

I'm making a loan to a buddy (secured promissory note with security agreement) and he has agreed to put one of his vehicles up for collateral. My understanding is that I need to have myself put on the title as a lien holder. What do I need to file in California to perfect the security interest?

Thanks

 

[tortoise]

I'm making a loan to a buddy

Reconsider

 

[LiLRiceBoi]

Reconsider

That's the reason for the securing agreement and perfecting the security interest. If he defaults, I take his car. Both parties understand this.

 

[Zenmervolt]

If he defaults, I take his car.

Uh, that's not how it works.

A secured party cannot repossess without proper foreclosure procedures.

Generally this means that you need to give the defaulter notice of default and you can't start the process of foreclosure for another 30 days or so. Even then the foreclosing party doesn't get to just keep the property; they have to sell the property in a commercially reasonable sale (usually an auction). A lender generally has the right to bid the value of the note's remaining balance at the auction, but they aren't guaranteed to keep it.

If the auction yields more than the outstanding balance of the loan (plus the reasonable costs of repossession and the auction itself) the excess money has to go to the borrower.

The specifics around timelines and exact requirements vary by state, but the fundamental reality is that there are a shit-ton of requirements around repossessing a vehicle and this sort of thing is a recipe for problems if a person isn't already well acquainted with his state's lending and foreclosure laws.

ZV