Hello, here is the answer of your query. > Primary security Primary security is the asset created out of the credit facility extended to the borrower and / or which are directly associated with the business / project of the borrower for which the credit facility has been extended. > Collateral security Collateral security is any other security offered for the said credit facility. For example, hypothecation of jewellery, mortgage of house, etc. > **In Simple Language** Primary security is the security someone offered to a bank to cover any risk the bank faces by granting a credit facility to a borrower. However, sometimes a single security may not be sufficient to cover the risk. **Example**: X bank grants a credit facility of $100 to a borrower called 'B,' and the borrower offers a bare land of $60 to the bank as the security. As you can see, the is bank facing a risk of $40. ************************* To cover up the balance of the credit risk, the borrower needs to offer another security. This new security is known as a collateral security. In that case, any security other than the primary security is a collateral security.
Hello Sonu, The difference between primary security and collateral security is briefly explaining here. Primary security is the asset created out of the credit facility extended to the borrower for which the credit facility has been extended. Collateral security is any other security other than the primary security offered for the said credit facility. These are the major difference of primary security and collateral security.