TYPES OF LOAN

SECURED LOAN UNSECURED LOAN

g. BLDG. which then becomes a secured debt owed to the creditor who gives the loan. 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. ‡ A secured loan is a loan in which the borrower pledges some asset (e.SECURED LOAN ‡ SECURED LOANS ARE THOSE WHICH ARE MADE ON THE SECURITY OF TANGIBLE ASSETS LIKE LAND. GOODS ETC. The debt is thus secured against the collateral in the event that the borrower defaults. MACHINERY. a car or property) as collateral for the loan. .

The loan is given on the basis of your income and expense behavior. you do not need to put your collateral against the loan.UNSECURED LOAN ‡ ANY KIND OF TANGIBLE SECURITY IS NOT OFFERED BY THE BORROWER TO THE BANK ‡ With this type of loan. .

Secured loans ‡ ‡ ‡ ‡ ‡ LIEN PLEDGE MORTGAGE HYPOTHECATION ASSIGNMENT .

. 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. provided that there is no contract express or implied. securities or any other assets belonging to the debtor to retain them until the debt is repaid.LIEN ‡ A lien is the right of a creditor in possession of goods. to the contrary.

Ownership is not transferred Bank only has the right to retain .‡ In other words. Lien gives the bank only the right to retain the possession of goods and not the power to sell the goods.

‡ It is created when goods are delivered by one person to another for securing debt. for securing some kind of payment of debt. ‡ Bailor: person who pledges the good ‡ Bailee: person to whom the goods are pledged .PLEDGE ‡ It is the bailment of goods.

‡ For eg: National Savings Certificate. fixed deposit receipt etc. ‡ Borrower: is a bailor or pledger ‡ Bank: is a bailee or pledgee .‡ Pledging is done of those goods which are MOVABLE IN NATURE. debentures. shares.

.‡ 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.

then the bank has the right to recover the loan from the sale of property that is mortgaged.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. .

machinery is given as security.‡ Immovable property like land. ‡ Borrower: Mortgager ‡ Bank: Mortgagee ‡ Two types of Mortgage 1) Legal Mortgage 2) Equitable Mortgage .bldg.

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.

created by a borrower in favour of a secured creditor without delivery of possession of the movable property to such creditor. .HYPOTHECATION ‡ Hypothecation means a charge in or upon any movable property. as a security for financial assistance. existing or future.

‡ Inspection by the bank ‡ No multiple financing is allowed by banks ‡ Board to be put up that the goods are hypothecated. . vehicles.‡ Movable properties like goods. ‡ Borrower retains. possess and sell the goods but at the same time he submits the stock statements of such hypothecated goods to the bank. raw materials are hypothecated as security.

property or debt by the borrower to the bank for loan.INSURANCE POLICY ETC. ‡ Borrower: assignor ‡ Bank: assignee ASSIGNMENTS ARE MADE OF ACTIONABLE ITEMS SUCH AS BOOK DEBTS.ASSIGNMENT ‡ Transfer of any existing or future right. .

‡ Actionable claim can be undertaken in the court of law. . the assignee gets total control over the assignor s claim and therefore the assignee (bank) is the top priority over other creditors. ‡ By creating a charge by assignment.

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