What is the Difference Between Charge, Mortgage and Pledge?

Charge, mortgage, and pledge are security interests used by banks and financial institutions to secure loans or debts. They have some similarities and differences:

1. Charge: A charge is a right created in favor of a lender over the borrower's assets as security for a loan. There are two types of charges: fixed charges and floating charges. A fixed charge is attached to specific assets, while a floating charge is attached to a class of assets that may change periodically. Charges are created either by operation of law or by an act of the parties involved.
2. Mortgage: A mortgage is a transfer of an interest in immovable property as security for a loan. In a mortgage, the assets remain the property of the borrower, but the lender has a right to take possession of the property and sell it to recover the loan amount if the borrower defaults on the loan. Mortgages are typically used to secure loans for real estate purchases.
3. Pledge: A pledge is a contract between the borrower (or the party that owes money or services) and the lender, where the borrower delivers assets to the lender as security for the loan. In a pledge, the borrower temporarily hands over possession of the property to the lender, who has limited interest in the pledged asset. The lender has the legal title to the asset, and in case of default, the lender can sell the asset to recover the loan amount.

In summary, a charge is a right created over assets, a mortgage is a transfer of interest in immovable property, and a pledge involves the delivery of assets to the lender as security for a loan. While charges and mortgages are created either by operation of law or by an act of the parties involved, pledges are made by a contract between the parties.

Comparative Table: Charge, Mortgage vs Pledge

Here is a table that highlights the differences between charge, mortgage, and pledge:

In summary, pledge, hypothecation, and mortgage are different forms of security interests that can be created on assets to secure a loan. The main differences lie in the type of property used as security, the legal definition, and the process for recovering the debt amount in case of default by the borrower.