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Simple English definitions for legal terms
purchase-money interest
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A quick definition of purchase-money interest:
Purchase-money interest refers to a type of security interest that is created when a buyer borrows money from a lender to purchase a specific item, such as a car or a house. The lender then has a legal claim on that item until the buyer pays back the loan in full. This type of interest is often used in financing agreements and can provide additional protection for the lender in case the buyer defaults on the loan.
A more thorough explanation:
Definition: A purchase-money interest is a type of security interest that arises when a seller of goods or property finances the purchase for the buyer. The seller retains a security interest in the goods or property until the buyer pays off the purchase price.
Example: John wants to buy a car from Jane, but he doesn't have enough money to pay for it upfront. Jane agrees to finance the purchase and retains a purchase-money interest in the car until John pays off the loan. If John defaults on the loan, Jane can repossess the car.
Explanation: In this example, Jane is the seller and John is the buyer. Jane is financing the purchase of the car, and she retains a purchase-money interest in the car until John pays off the loan. This means that Jane has a security interest in the car, which gives her the right to repossess it if John defaults on the loan.