To pay tuition at City College, Dora borrows funds from Equity Credit and gives as security a note on which Dora is the payee. Equity Credit's loan officer agrees to hold the note as collateral. The lender does not file a financing statement. Equity Credit's security interest is perfected because

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Possession of the note by the lender is a method of perfecting a security interest in negotiable instruments under Article 9 of the Uniform Commercial Code (UCC). Filing a financing statement is not required for perfection when the secured party has possession of the collateral.

To Pay Tuition at City College, Dora Borrows Funds from Equity