Legal Definitions - PMSI

Definition: PMSI stands for purchase-money security interest. It is a type of security interest created when a buyer uses a lender's money to make a purchase and immediately gives the lender security. It can also be taken or retained by the seller of the collateral to secure all or part of its price or taken by a person who gives value to enable the debtor to acquire rights in or the use of collateral if that value is in fact so used.

For example, if a buyer's purchase of a car is financed by a bank that loans the amount of the purchase price, the bank's security interest in the car that secures the loan is a purchase-money security interest.

PMSI is abbreviated as PMSI and is also known as a purchase-money interest.