Understanding Charges in Lending

A charge means creating a right over tangible asset offered by borrower/debtor to the lender/creditor. It allows the lender to safeguard their interest by having certain rights over the tangible security provided by the borrower.

The different modes/kinds/types of creating charges over securities are Lien, Pledge, Hypothecation, Mortgage, and Assignment.

Pledge involves the delivery of possession of the security to the lender, while in hypothecation, the possession of the security remains with the borrower.

<p>Creating a charge over securities provides the lender with certain rights over tangible security, allowing them to safeguard their interests and have the option to sell or transfer the security in the event of borrower default or non-payment of the loan.</p> Signup and view all the answers

<p>Lien is a kind of charge created over tangible security and is an important right of the banker. It refers to the creditor/lender's right to retain possession of the security until the debt is repaid.</p> Signup and view all the answers