TYPES OF LOAN

SECURED LOAN

UNSECURED LOAN
 SECURED LOAN
• SECURED LOANS ARE THOSE WHICH ARE MADE ON THE
SECURITY OF TANGIBLE ASSETS LIKE LAND, BLDG, MACHINERY,
GOODS ETC.

• A secured loan is a loan in which the borrower pledges some

asset (e.g. a car or property) as collateral for the loan, which
then becomes a secured debt owed to the creditor who gives
the loan. The debt is thus secured against the collateral — in
the event that the borrower defaults, the creditor takes
possession of the asset used as collateral and may sell it to
satisfy the debt by regaining the amount originally lent to the
borrower

• IT PROVIDES SAFETY TO A BANK.

 UNSECURED LOAN

• ANY KIND OF TANGIBLE SECURITY IS NOT

OFFERED BY THE BORROWER TO THE BANK

• With this type of loan, you do not need to put

your collateral against the loan. The loan is
given on the basis of your income and expense
behavior.
 Secured loans
• LIEN
• PLEDGE
• MORTGAGE
• HYPOTHECATION
• ASSIGNMENT
 LIEN
• A lien is the right of a creditor in possession of
goods, securities or any other assets belonging to
the debtor to retain them until the debt is repaid,
provided that there is no contract express or
implied, to the contrary. It is a right to retain
possession of specific goods or securities or other
movables of which the ownership vests in some
other person and the possession can be retained till
the owner discharges the debt or obligation to the
possessor.
• In other words,

Lien gives the bank only the right to retain the

possession of goods and not the power to sell
the goods.

Ownership is not transferred

Bank only has the right to retain

 PLEDGE
• It is the bailment of goods, for securing
some kind of payment of debt.
• It is created when goods are delivered by
one person to another for securing debt.
• Bailor: person who pledges the good
• Bailee: person to whom the goods are
pledged
• Pledging is done of those goods which are
MOVABLE IN NATURE.

• For eg: National Savings Certificate, shares,

debentures, fixed deposit receipt etc.

• Borrower: is a bailor or pledger

• Bank: is a bailee or pledgee
• If the borrower fails to pay with the stimulated
time period then ??

Then the bank has the authority to sell the

pledged security by giving a reasonable notice

Or
The bank files a suit against the borrower to
return the debt and retain the property
pledged as security.
 MORTGAGE
• For the purpose of securing a loan an
immovable property is transferred
• The possession of the property remains with
the borrower but the ownership is tranfered
to the bank
• Incase the borrower fails to return the debt,
then the bank has the right to recover the loan
from the sale of property that is mortgaged.
• Immovable property like land,bldg, machinery
is given as security.

• Borrower: Mortgager
• Bank: Mortgagee

• Two types of Mortgage

1) Legal Mortgage
2) Equitable Mortgage
 Legal Mortgage
• Legal title is transferred by the way of deed

• Legal transfer is re-transfereed upon the

repayment

• Involves Stamp duty and registration charges.

 EQUITABLE MORTGAGE
• Legal title is not transferred
• Documents are given
• Legal Mortgage is undertaken or is executed
when the borrower fails to pay
• The Mortgagee applied it to the court to
convert the equitable mortgage to lagal
mortgage.
 HYPOTHECATION
• Hypothecation means a charge in or upon any
movable property, existing or future, created
by a borrower in favour of a secured creditor
without delivery of possession of the movable
property to such creditor, as a security for
financial assistance.
• Movable properties like goods, vehicles, raw
materials are hypothecated as security.
• Borrower retains, possess and sell the goods
but at the same time he submits the stock
statements of such hypothecated goods to the
bank.
• Inspection by the bank
• No multiple financing is allowed by banks
• Board to be put up that the goods are
hypothecated.
 ASSIGNMENT
• Transfer of any existing or future right,
property or debt by the borrower to the bank
for loan.
• Borrower: assignor
• Bank: assignee
ASSIGNMENTS ARE MADE OF ACTIONABLE
ITEMS SUCH AS BOOK DEBTS,INSURANCE
POLICY ETC.
• Actionable claim can be undertaken in the
court of law.

• By creating a charge by assignment, the

assignee gets total control over the assignor’s
claim and therefore the assignee (bank) is the
top priority over other creditors.