When a valuable possession is kept by the borrower as a security with the lender it is called a pledge. It is done to secure the debt or the loan borrowed. A pledged asset is collateral offered to the lender on behalf of the loan issued by them. A pledged loan helps to reduce the down payment that is required to be paid while borrowing a loan. It also helps to reduce the interest charged on loan. A borrower may keep assets like stocks, shares, bonds, etc. as a pledge. Car backlog [รถค้างค่างวด, which is the term in Thai] is also a type of pledge where the borrower pledges his/her car.

Who is a pledger?

A pledger is a person who wishes to borrow loan by pledging an asset with the lender. In simple terms, a pledger is a borrower or a debtor. The right of ownership of the asset remains with the pledger. The pledger only transfers the possession of the asset. Upon repayment of loan the pledger gets the asset back from the lender. The property or asset which is placed as security cannot be used without the permission of the lender unless for its preservation.

Who is a pledgee?

A pledgee is a person who lends money to the pledger. In simple terms, a pledgee is called a lender or creditor. It is the duty of the pledgee to keep the property of the pledger safe. The pledgee cannot retain the property after the loan has been repaid. In case the pledger remains unsuccessful in repaying the debt, the pledgee has the right to sell the property and recover its amount. Depending on the agreement between both the parties the pledgee may or may not have the right of possession on any income arriving from the pledged asset.