Pledging Assets

Pledging assets is an offering asset to a lender as collateral for a loan. During the period of the loan, the lender has possession of the asset but is not able to seize ownership unless the business defaults on the loan.

When/If the debt is paid off and all the loan conditions have been met, the lender then returns the asset to the borrower. In mortgage lending, a pledged asset can also drastically reduce the initial down payment. This allows the borrower to retain possession of the asset, and maintain its capital appreciation, without having to sell it to gather enough for a down payment.

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