Business Law

Difference Between Pledge and Mortgage

Difference Between Pledge and Mortgage – In everyday language, pledge and mortgage are taken to mean the same but, from the legal point of view, there is a big difference between the two. The following table classifies the distinction between the two

Pledge – The bailment of goods as security for payment of a debt or performance of a promise is called pledge’. The bailor is, in this case, called the ‘pawnor’ or ‘pledger’ and the bailee is called the ‘pawnee’ or ‘pledgee’.

Difference Between Pledge and Mortgage

Sr. No.BasisPledgeMortgage
1NaturePledge is always of movable property.Mortgage is only for immovable property.
2TransferIt involves physical transfer of goods, not the ownership of goods.The ownership of property can be transferred under certain conditions.
3Written ContractThe contract is not essential to be in written form.It is essential for the contract to be written, testified by two witnesses and registered.
4Right To UseThe pawnee cannot use the goods kept in pledge.The mortgagee has the right to use the property mortgaged to him.
5Number Of LoansAn item can be kept in pledge for only one loan.The mortgagor can take more than one loan not exceeding the value of the property mortgaged.
6Re- LoanThe pawnee cannot pledge the goods in his possession to another person against a loan.The mortgagee can transfer his interest in the mortgaged property to another person by a sub-mortgage.
7RightThe pawnee has the right, in the event of a default on the part of pawnor, only to sell the goods kept under pledge.The mortgagee who has given the loan first, has the right to claim the amount of his loan first, in case the property is mortgaged to more than one mortgagee.
8RestrictionsThe pawnor cannot impose any restrictions on the goods under pledge.The mortgagee can, in some circumstances, impose restrictions on the property mortgaged.

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