Mortgage: Mortgage is a type of charge related to immovable property. Immovable property shall include land, benefits to arise out of land and things attached to the earth or permanently fastened to anything attached to the earth. It does not include standing timber, growing crops or grass.
Pledge: Pledge arises when the lender (pledgee) takes possession of either the
goods or bearer securities for extending a credit facility to the borrower (pledgor).
The
pledgee can retain the possession
of
the goods until the pledgor repays the entire
debt amount
and
in case of a default, the pledgee has the right to sell the
goods in his possession and adjust its proceeds towards the amount
due.(example Jewel loan)
Hypothecation: Hypothecation is a way of creating a charge against the security
of
movable assets, which is much similar to pledge. (example purchasing a bike
from bank loan). The possession and the ownership remain with the borrower.
Since the possession remains with the borrower, he may, at any time either create
a subsequent charge by way of pledge over same goods or may sell them. In such
cases, the rights of the
pledgee
usually super cedes the rights of the
person in
whose favor the goods were hypothecated,
if the fact of existence of such a charge is not known to the subsequent pledgee.