In the UK, lenders secure their loans through two principal forms of security interest in the borrower’s assets: a charge and a mortgage. The primary difference between the two is that the holder of a charge does not take title to the secured asset, while the holder of a mortgage does (with the expectation that title will be transferred back to the borrower upon satisfaction of the related loan or debt). In both cases, possession of the asset by the lender is not required.

Lenders will demand a charge, a mortgage, or both depending on the nature of the asset and the circumstances of the seller. However, most lenders will seek to secure all of the assets of the borrower through a combination of charges and mortgages. But for either security interest to be valid and effective as possible, it must be created in the appropriate manner and properly perfected.