DIFFERENT TYPES OF CHARGING SECURITIES

DIFFERENT TYPES OF CHARGING SECURITIES

DIFFERENT TYPES OF CHARGING SECURITIES

Assignment	Pledge
Hypothecation	Mortgage
Lien	Set - off

ASSIGNMENT

• The transfer of an individual's rides to another person is called assignment. It is a mode of providing security to a banker for a loan

• In banking practice a borrower may assign the book depth money do from government depth and life insurance policies as security for an advance

HYPOTHECATION

• Hypothecation is described as a transaction where by money is borrowed by the customer (owner of the goods) on the security of the property without transferring either the property or the position to the lender (Bank)

• Hypothecation differs from pledge because goods remain with the position of the borrower

• Example: loan taken out for automobiles, plant machinery etc

PLEDGE

• Pledge means bailment (an act of delivering goods without transfer of ownership) of goods for purpose of providing security for payment of debt

• The ownership of the property is held by the borrower (customer), but the goods must be placed in the position of the lender (Bank)

• Example: gold loans, loan against goods / stock etc

MORTGAGE

• Mortgage is a transfer of interest in immovable property to avail a loan

• Mortgages is user by individuals and businesses to purchase house / land without paying the entire value of the purchase up front

• In this case over a period of many years, the borrower repays the loan

• Is bar over (customer) stops paying the EMI of loan, the bank will take position of the property

• Example: home loan

LIEN

Lean is the legal right of a lender (Bank) to retain possession of the collateral property of a borrower (customer) who fails to meet the obligations of a loan Agreement

Banker can dispose of the securities after giving proper notice to the borrower, in case the dept is not paid

SET - OFF

• The right of set - off allows a bank to use its customers deposits against the customers debts as the debt become due

• Right of set - off with the bank, which it may use anytime to utilize any money belonging to borrower and deposited with the bank

DIFFERENCE BETWEEN PLEDGE HYPOTHECATION AND MORTGAGE

	PLEDGE	HYPOTHECATION	MORTGAGE
Type of security	Movable	Movable	Immovable
Possession of the security	Remains with lender (bank)	Remains with borrower (customer)	Usually remains with borrower
Example	Gold loan / loan against share / loan against goods	Vehicle loan / loan against missionary	Home loan

REVERSE MORTGAGE LOAN

• Purpose of reverse mortgage scheme is to provide a source of regular income for senior citizens in the form of monthly payout or combination of monthly payout and lump sum (available for medical purpose only) amount

• This scheme is applicable for Indian citizen above 60 years

• The loan amount is dependent on the value of house property as assessed by the lander, age of the borrowers and prevalent interest rate

• The maximum period of the loan is 20 years

• On the borrowers death or on the borrowers leaving the house property permanently the loan is repaid along with accumulated interest, through sale of the house property

• The borrowers/heirs can also repay the loan with accumulated interest and have the mortgage released without resorting to sale of the property

TEASER HOME LOAN

• An adjustable - rate mortgage loan in which the borrower pays a very low initial interest rate, which increase after a few years

• If a bank offers a slightly lower rate in the initial years and higher rate in latter years it is called a teaser loan