What is the purpose of filing a UCC-1 financing statement?

• A. To perfect a lien on collateral.
• B. To establish new loan terms.
• C. To terminate existing liens.
• D. To set interest rates.

Answer: (A)

Filing a UCC-1 financing statement is about public notice to perfection a secured party’s lien on collateral. Once there’s a security agreement and the debtor signs, filing the UCC-1 with the appropriate state office records the secured party’s interest and helps establish its priority against other creditors if the debtor defaults or goes bankrupt. This is about making the lien visible and enforceable against third parties, not about setting loan terms, terminating liens, or setting interest rates. The actual loan terms and rates come from the loan agreement, and a separate termination statement is used to release a lien when it’s no longer in effect. Perfection can also occur by other methods for certain types of collateral, but filing is the common way to secure and publicly protect the creditor’s claim.