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Distinguish among........

CA-ASPIRANT (CA-STUDENT ) (650 Points)

14 May 2009

Hello

Please explain following terms

Mortgage:

Hypothecation:

Pledge:

LIen:

Thanks

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2 Replies

Milan Somani (CA) (1456 Points)
Replied 14 May 2009

A mortgage is the transfer of an interest in property (or the equivalent in law - a charge) to a lender as a security for a debt - usually a loan of money. While a mortgage in itself is not a debt, it is the lender's security for a debt.

A lien is a form of security interest granted over an item of property to secure the payment of a debt or performance of some other obligation.

Hypothecation is a transaction where a person borrows money from a Financier against a security of a movable asset. The security belongs to the borrower and remains in his possession during the repayment period. If the borrower fails to repay the loan, the financier can claim the hypothecated asset after obtaining court order.

Pledge is a hypothecation with transfer of possession.

Difference between a mortgage, hypothecation and pledge?

In a mortgage there is transfer of interest in the immovable property till the re-payment of the loan. Hypothecation involves movable property, which is given as security for the loan. Possession of movable property remains with the debtor. In the case of pledge too, movable property is the security. Here, the creditor is given possession of the movable property.