Understand the terms of pledge, mortgage, liquidation and liquidation in one article!

Understand the terms of pledge, mortgage, liquidation and liquidation in one article!

What is a pledge?

Let’s first talk about what a pledge is.

Pledge is a type of security interest. A pledge refers to a property that a debtor or a third party hands over to the creditor for possession as a guarantee for the creditor's rights. When the debtor fails to perform its debt, the creditor has the right to receive priority payment from the price of the property at a discount or auction or sale of the property in accordance with the law. right. The property is called the pledge, the person who provides the property is called the pledger, and the person who enjoys the right to pledge is called the pledgee. A pledge guarantee shall be signed in writing. The pledge contract shall take effect when the pledged object or the pledged right is transferred to the pledgee.

The biggest difference between mortgage and pledge is that mortgage does not transfer the collateral, while pledge must transfer the possession of the pledge, otherwise it is not a pledge but a mortgage. The second big difference is that a pledge cannot pledge real estate (such as real estate) because the transfer of real estate is not possession but registration. Liquidated pledge and liquidated pledge clauses refer to contract clauses in which the parties agree that if the debtor fails to repay the debt in full before the expiration of the debt period, the ownership of the collateral will directly vest in the security holder, and is an invalid clause. Article 401 of the Civil Code: "If the mortgagee agrees with the mortgagor before the expiration of the debt performance period that the mortgaged property will belong to the creditor if the debtor fails to pay the due debt, he can only receive priority payment for the mortgaged property in accordance with the law." Civil Code Article 428 of the Code: "If the pledgee agrees with the pledgor before the expiration of the debt performance period that the pledged property will belong to the creditor if the debtor fails to perform the due debt, he can only receive priority payment for the pledged property in accordance with the law. "In order to ensure fairness and justice and the principle of equal value and compensation, our country prohibits liquidation and mortgage clauses. The Civil Code stipulates that although the security holder cannot directly obtain ownership of the security, he can auction or sell the security and collect the proceeds. The price will be paid first.