'Pledge' and 'Hypothecation' both the word are very common in the grass root business culture and taken as same method/instrument for obtaining a loan from Bank/Financial Institution/NBFC/Micro Finance Institutions: Do y

Answer 3 I don't agree completely with this statement. Basic Differences: In case of pledge , the lender has unilateral right i.e. without referring to the borrower, can appropriate the securities, if the borrower (Pledger) defaults or breaches otherwise. The possession of the goods is transferred to the lender. On the other hand - in case of hypothecation of the securities, the lender needs concurrence of the borrower. The possession of the goods remains with the borrower, but the charge is created in favour of the lender. This is the main difference between the two, wherein the purpose is same i.e. borrowing of the funds. Clearly, the Pledge is more favourable to the lender because the lender has physical possession of the asset and can appropriate it directly upon default, which provides greater security and ease of recovery compared to hypothecation where the lender needs borrower's concurrence and might face challenges in taking possession.