Pledging is a way of borrowing a loan. In a pledged loan the borrower provides one or a combination of more than one asset as collateral. A pledge loan is given when the lender thinks that the borrower does not have all the required guarantees to repay the loan. Hence, if the borrower is not able to repay the loan the bank will execute its right on the pledged asset to recover the money of loan. The financial institutions use pledging as a way secure their money. Car pledge [รับจำนำรถจอด, which is the term in Thai], shares and stocks are common assets which are used for pledging.
What is the loan against security?
A loan against security is a loan where the borrower places his/her asset as a pledge with the lender. The assets are called collateral of the loan. A borrower can keep shares, real estate, vehicles as security. Hence, if you are thinking of selling any of the aforesaid assets in return of liquid cash than think twice before doing it. Because you can still get the amount with the help of the assets without even losing its ownership.
Working on loan against securities
A loan that is lent against security is offered in the form of an overdraft facility. The overdraft facility will start once the borrower has deposited the security with the lender and fulfilled all other terms and conditions. The borrower has to pay interest on the amount of loan which is being used. In simple words, the borrower will pay interest only on the sum which he/she uses not on the entire amount of loan. The calculation of interest is done for the period for which the amount was used. The amount of loan offered depends on the value of the security offered.