1. What is a pledge and what is a pawn?

1. What is a pledge and what is a pawn?

Both a pledge and a pawn are ways to obtain a loan of money where the borrower provides physical and movable assets to the lender as security.

Pledging and pawning are similar arrangements in that (i) the lender may charge interest on the loan; (ii) both pledging and pawning apply to physical and movable assets and not immovable assets (e.g. land or real estate) nor intangible assets (e.g. contractual rights or receivables); (iii) the borrower will have to deliver the assets to the lender for its possession throughout the duration of the loan; (iv) the lender has the right to sell the assets if the borrower fails to repay the loan; and (v) the lender will have to return the assets to the borrower after the borrower has repaid the principal and interest of the loan in full.

Pawnbroker business is regulated by the Pawnbrokers Ordinance (Cap. 166).