What is the Difference Between Charge, Pledge and Mortgage?

 When securing a loan or credit facility, businesses and individuals often come across three important legal terms: charge, pledge, and mortgage. While these terms are related to creating security interests over assets, they differ significantly in structure, applicability, and legal implications. At L&Y Tax Advisors, we help clients understand these distinctions to make informed financial decisions.



What is a Charge?

A charge is a right created over movable or immovable property to secure repayment of a debt, without transferring ownership or possession. Charges are commonly used for both existing and future assets, such as a floating charge on a company's inventory.


What is a Pledge?

A pledge involves transferring possession (not ownership) of movable goods to a lender as collateral. Once the loan is repaid, possession returns to the borrower. Pledges are widely used for tangible assets like jewelry, stock, or securities.



What is a Mortgage?

A mortgage is a security interest specifically created over immovable property, such as land or buildings, where ownership remains with the borrower, but the lender holds legal rights until the debt is cleared.

Understanding these distinctions—along with related concepts like collateral, lien, and security interest—helps businesses choose the right financing structure. For a detailed breakdown, read our full guide on charge vs pledge vs mortgage.

You may also find these resources helpful: learn about the difference between EOM and KAM, or explore what is a VAT number in the US.


For expert guidance, trust L&Y Tax Advisors to simplify complex financial and tax concepts.



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