The meaning of pledging is to pledge one or more assets as an additional form of payment guarantee, usually with a lender. This system is used in banking to guarantee financial operations, as may be the case of loans where the applicant's profile does not have sufficient guarantees for the return of the borrowed money.
In the event of a non-payment by the client, the entity would have the possibility of executing the right to keep the pledged asset and thus recover the money.
What is pledging on a loan?
It is one more resource that the financial institution that lends the money may have to ensure the recovery of capital, even in the form of an asset. It may seem like a very similar process to warranty on a mortgage, in which the bank will keep the house if it does not pay the installments, but there are differences, as we will see later.
It should be clarified that during the time that the loan is extended, the pledged asset cannot be used in any way. If we choose to pledge a vehicle to obtain a loanDuring the time that this process lasts, it may not be conducted, sold or done with it, since it would be physically guarded by the person who granted the pledged loan.
When it comes to pledging money in time deposits or accounts, what works is a debt relief system. If they are fund shares, they are settled and when they are securities they are put up for sale according to the regulations of the Commercial Code.
Difference between pledging and mortgaging
Unlike a mortgage loan, when you opt for a pledge, an extensive list of physical or financial assets can be provided as payment security. For this, it will be enough that they reach the value of the loan that is granted and it can be with one or more assets.
It can be with a car, a room, a house, a package of actions, an amount of capital or money deposited in a Investment fund.