Lien vs. Pledge — What's the Difference?
By Urooj Arif & Fiza Rafique — Updated on April 15, 2024
A lien represents a legal claim over property until a debt is repaid, whereas a pledge involves physically handing over an asset as collateral for a loan.
Difference Between Lien and Pledge
Table of Contents
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Key Differences
A lien is a legal right or claim against an asset, which is usually granted to a creditor, ensuring the asset cannot be sold free of the lien until the debt owed is fully paid. On the other hand, a pledge requires the borrower to physically hand over the collateral to the lender until the loan is repaid.
Liens can be placed on property, including homes, cars, and other valuable assets, as a form of security for creditors. Whereas, pledges often involve movable assets such as jewelry, stocks, or other valuables which are physically given to the lender as security.
The lien provides a passive form of security as it does not involve the transfer of physical possession of the asset. On the other hand, a pledge is an active form of security, necessitating the physical transfer of the pledged asset to the lender.
In the case of a lien, the borrower retains possession of the asset, although it is encumbered by the lien. Whereas in a pledge, the borrower loses possession of the asset for the duration of the pledge.
If the borrower defaults on their obligation, the lienholder must typically undergo a legal process to enforce the lien, selling the asset to recover debts. Conversely, in a pledge, the lender already possesses the collateral and can sell it directly if the borrower defaults.
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Comparison Chart
Definition
Legal claim over an asset
Physical handing over of an asset
Possession
Remains with the borrower
Transferred to the lender
Type of Asset
Can be immovable or movable
Typically movable
Security Form
Passive
Active
Default Process
Requires legal proceedings to enforce
Direct sale of asset by lender possible
Compare with Definitions
Lien
Legal claim on property to secure payment.
The contractor placed a lien on the property after the homeowner failed to pay.
Pledge
To deposit something as security for a loan.
She pledged her wedding ring to secure a small loan.
Lien
A charge against property making it security for the payment of a debt.
The tax authorities imposed a lien on his assets for unpaid taxes.
Pledge
A bailment of goods to a creditor as security for some debt.
He made a pledge of his vintage watch for the loan.
Lien
A form of security interest granted over an item.
A lien was recorded on the title to ensure the loan was repaid.
Pledge
Temporary transfer of property as security.
He entered into a pledge agreement involving his collection of rare coins.
Lien
Legal right to sell the encumbered property.
The bank exercised its lien on the house for mortgage recovery.
Pledge
Physical control of assets transferred to another party.
The pledged shares are held by the lender until the loan is repaid.
Lien
Right to keep possession of property belonging to another person.
The mechanic has a lien on the car until the repair bill is paid.
Pledge
A token or security given to signify the payment of a debt.
His car served as a pledge until he could pay off the debt.
Lien
A lien ( or ) is a form of security interest granted over an item of property to secure the payment of a debt or performance of some other obligation. The owner of the property, who grants the lien, is referred to as the lienee and the person who has the benefit of the lien is referred to as the lienor or lien holder.
Pledge
A solemn promise or undertaking
The conference ended with a joint pledge to limit pollution
Lien
A claim upon a part of another's property that arises because of an unpaid debt related to that property and that operates as an encumbrance on the property until the debt is satisfied.
Pledge
A thing that is given as security for the fulfilment of a contract or the payment of a debt and is liable to forfeiture in the event of failure
He had given the object as a pledge to a creditor
Lien
The right to hold another's property as security for a debt owed.
Pledge
The drinking of a person's health; a toast.
Lien
(obsolete) A tendon.
Pledge
Commit (a person or organization) by a solemn promise
The government pledged itself to deal with environmental problems
Lien
(legal) A right to take possession of a debtor’s property as security until a debt or duty is discharged.
Pledge
Give as security on a loan
The creditor to whom the land is pledged
Lien
The spleen.
Pledge
Drink to the health of
In his hand a sculptured goblet, as he pledged the merchant kings
Lien
Alternative form of lain
Pledge
A solemn binding promise to do, give, or refrain from doing something
Signed a pledge never to reveal the secret.
A pledge of money to a charity.
Lien
A legal claim; a charge upon real or personal property for the satisfaction of some debt or duty; a right in one to control or hold and retain the property of another until some claim of the former is paid or satisfied.
Pledge
Something given or held as security to guarantee payment of a debt or fulfillment of an obligation.
Lien
The right to take another's property if an obligation is not discharged
Pledge
The condition of something thus given or held
Put an article in pledge.
Lien
A large dark-red oval organ on the left side of the body between the stomach and the diaphragm; produces cells involved in immune responses
Pledge
Delivery of goods or personal property as security for a debt or obligation
A loan requiring a pledge of property.
Pledge
The contract or transaction stipulating or involving such delivery.
Pledge
A token or sign
"fair pledges of a fruitful tree" (Robert Herrick).
Pledge
A person who has been accepted for membership in a fraternity or similar organization and has promised to join but has not yet been initiated.
Pledge
A vow to abstain from alcoholic liquor
Ex-drinkers who have taken the pledge.
Pledge
(Archaic) The act of drinking in honor of someone; a toast.
Pledge
To offer or guarantee by a solemn binding promise
Pledge loyalty to a nation.
Pledge that the duties of the office will be fulfilled.
Pledge
To bind or secure by a pledge or promise
Pledged themselves to the cause.
Pledge
To deposit as security; pawn.
Pledge
To promise to join (a fraternity or similar organization).
Pledge
To accept as a prospective member of such an organization.
Pledge
(Archaic) To drink a toast to.
Pledge
To make a solemn binding promise; swear.
Pledge
(Archaic) To drink a toast.
Pledge
To make a solemn promise (to do something).
Pledge allegiance to the flag
Pledge
To deposit something as a security; to pawn.
Pledge
(transitive) To give assurance of friendship by the act of drinking; to drink to one's health.
Pledge
A solemn promise to do something.
Pledge
A promise to abstain from drinking alcohol.
Pledge
An asset or person temporarily handed over to guarantee the fulfilment of something promised, under threat of permanent loss of the thing handed over; surety, security, hostage.
Pledge
(law) A bailment of personal property to secure payment of a debt without transfer of title.
Pledge
The personal property so pledged, to be kept until the debt is paid.
Pledge
(college slang) A person who has taken a pledge of allegiance to a college fraternity, but is not yet formally approved.
Pledge
A drinking toast.
Pledge
The transfer of possession of personal property from a debtor to a creditor as security for a debt or engagement; also, the contract created between the debtor and creditor by a thing being so delivered or deposited, forming a species of bailment; also, that which is so delivered or deposited; something put in pawn.
Pledge
A person who undertook, or became responsible, for another; a bail; a surety; a hostage.
Pledge
A hypothecation without transfer of possession.
Pledge
Anything given or considered as a security for the performance of an act; a guarantee; as, mutual interest is the best pledge for the performance of treaties.
Pledge
A promise or agreement by which one binds one's self to do, or to refrain from doing, something; especially, a solemn promise in writing to refrain from using intoxicating liquors or the like; as, to sign the pledge; the mayor had made no pledges.
Pledge
A sentiment to which assent is given by drinking one's health; a toast; a health.
Pledge
To deposit, as a chattel, in pledge or pawn; to leave in possession of another as security; as, to pledge one's watch.
Pledge
To give or pass as a security; to guarantee; to engage; to plight; as, to pledge one's word and honor.
We mutually pledge to each other our lives, our fortunes, and our sacred honor.
Pledge
To secure performance of, as by a pledge.
To pledge my vow, I give my hand.
Pledge
To bind or engage by promise or declaration; to engage solemnly; as, to pledge one's self.
Pledge
To invite another to drink, by drinking of the cup first, and then handing it to him, as a pledge of good will; hence, to drink the health of; to toast.
Pledge me, my friend, and drink till thou be'st wise.
Pledge
A deposit of personal property as security for a debt;
His saxophone was in pledge
Pledge
Someone accepted for membership but not yet fully admitted to the group
Pledge
A drink in honor of or to the health of a person or event
Pledge
A binding commitment to do or give or refrain from something;
An assurance of help when needed
Signed a pledge never to reveal the secret
Pledge
Promise solemnly and formally;
I pledge that will honor my wife
Pledge
Pay (an amount of money) as a contribution to a charity or service, especially at regular intervals;
I pledged $10 a month to my favorite radio station
Pledge
Propose a toast to;
Let us toast the birthday girl!
Let's drink to the New Year
Pledge
Give as a guarantee;
I pledge my honor
Pledge
Bind or secure by a pledge;
I was pledged to silence
Common Curiosities
How does a lien work?
A lien allows the lienholder to claim possession of an asset if the debt is not repaid, often requiring legal action to enforce.
What is a pledge?
A pledge involves physically handing over possession of an asset as collateral for a debt or obligation.
What is a lien?
A lien is a legal right or claim against an asset, typically used as security for a debt or obligation.
What is the main difference between a lien and a pledge?
The main difference is that a lien does not involve the transfer of possession, whereas a pledge does.
What happens when a borrower defaults on a loan secured by a pledge?
The lender can sell the pledged asset directly without needing a court order.
Is it necessary to have a written agreement for a pledge?
While not always legally required, a written agreement is advisable to clearly define the terms of the pledge.
What types of assets can be pledged?
Almost any movable asset, like jewelry, stocks, or vehicles, can be pledged.
Can real estate be subjected to a lien?
Yes, real estate can have a lien placed against it for debts such as mortgages or unpaid taxes.
Are there different types of liens?
Yes, common types include mechanic's liens, tax liens, and judgment liens.
What legal protections do pledgors have?
Pledgors are protected by laws ensuring fair treatment and the right to recover the pledged property once the debt is paid.
Can liens affect the sale of a property?
Yes, liens must be satisfied or removed before the property can be sold clear of encumbrances.
How does bankruptcy affect liens and pledges?
In bankruptcy, liens may remain on the assets, whereas pledged assets might be sold to satisfy creditors.
What are the risks associated with accepting a pledged asset?
Risks include the depreciation of the asset's value and potential legal disputes over ownership or condition.
How can a lien be removed?
A lien can be removed by paying off the debt it secures or through a legal process if disputed.
Can a pledged asset be used by the lender?
Generally, lenders cannot use the pledged asset; it must be securely held until the loan is repaid.
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Written by
Urooj ArifUrooj is a skilled content writer at Ask Difference, known for her exceptional ability to simplify complex topics into engaging and informative content. With a passion for research and a flair for clear, concise writing, she consistently delivers articles that resonate with our diverse audience.
Co-written by
Fiza RafiqueFiza Rafique is a skilled content writer at AskDifference.com, where she meticulously refines and enhances written pieces. Drawing from her vast editorial expertise, Fiza ensures clarity, accuracy, and precision in every article. Passionate about language, she continually seeks to elevate the quality of content for readers worldwide.
