Are you wondering what is the difference between charge, pledge and mortgage? These terms might sound perplexing because they involve security interests.

Generally, the main distinctions between these three security interests are:

• The kind of property involved
• The transfer of ownership or possession
• The legal rights granted to the lender

Charge: A Wider Security Interest

A charge is a security interest established over an immovable or mobile asset without giving up ownership or possession. The parties’ actions or the operation of the law can prove it.

Unlike a mortgage, a charge does not include the transfer of property interest. However, it allows the lender to seize the asset to collect the loan in the event that the borrower fails.

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Pledge: Security of Movable Assets

A pledge is the bailment of commodities as collateral for fulfilling a commitment or paying back a debt. Under this arrangement, the lender (pledgee) receives moveable assets from the borrower (pledgor), such as:

• Gold
• Securities
• Goods

If the borrower defaults, the pledgee can sell the item, but the pledgor retains ownership.

Mortgage: Security of Immovable Property

In a mortgage, a specified immovable property, such as a building or piece of land, is transferred as security for a loan. Lenders get a legal stake in the property, while the borrower (mortgagor) keeps possession.

In the event of a borrower default, the mortgagee may take legal action to sell the property and recoup the loan.

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What Does it Mean to Charge a Mortgage?

To charge a mortgage means a lender uses its own mortgage rights as security for another loan. It is a right created over an existing mortgage debt. If that lender fails, its creditor can claim the benefits. It does not change your original loan terms.

What is a Pledge Mortgage (or Mortgage as a Pledge)?

Sometimes, depositing your property’s title documents with a bank creates security. This informal arrangement works like a pledge of papers. The lender gets a right over the immovable asset without a registered mortgage deed. It is quick but must follow local laws.

What is the Charge of Pledge?

The charge of pledge describes the lender’s legal hold on the goods you deliver. It is a possessory security interest. The lender can keep your gold or certificates until you clear the debt. It creates a duty to return the exact items upon full payment.

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Is a Pledge a Debt?

No, a pledge is never the debt itself. The debt is your promise to repay money. A pledge is simply the security, the movable asset given to back that promise. If you repay on time, the pledge ends and your goods come back to you.

Mortgage vs Charge vs Pledge

A mortgage gives the lender a legal interest in your immovable property like land. A charge is a right over an asset, but ownership stays with you. A pledge requires handing over movable goods like jewelry. The lender holds these until you repay fully.

What is the Difference Between Charge, Pledge and Mortgage?

 

Feature	Charge	Pledge	Mortgage
Asset type	Movable or Immovable	Moveable	Immovable
Possession	Retained by borrower	Transferred to lender	Retained by borrower
Ownership	Retained by borrower	Retained by borrower	Interest transferred to lender
Legal rights	Right to claim asset upon default	Right to sell asset upon default	Right to sell via legal process
Creation	By contract or operation of law	By contract	By contract and registration

 

The Bottom Line

Making wise financial and legal decisions requires understanding what is the difference between charge, pledge and mortgage. The nature of the asset, the transfer of possession or ownership, and the legal rights involved vary across the three, even though they are all methods to protect a lender’s interest. A charge is a more general term that can apply to both movable and immovable assets without transferring possession or ownership. A pledge covers moveable assets with possession transferred to the lender. Mortgage relates to immovable property with an interest transferred.

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