When a debtor uses collateral to secure a loan from a bank, a purchase-money security interest is created.

Name: When a debtor uses collateral to secure a loan from a bank, a purchase-money security interest is created.
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A purchase-money security interest (PMSI) specifically refers to an interest that secures repayment of money used by the debtor to purchase the collateral. It is not created by simply using collateral to secure a loan unless the loan proceeds are used to acquire that collateral.

When a Debtor Uses Collateral to Secure a Loan from a Bank