Compare collateral with mortgaged property

This article helps readers learn more about collateral and mortgaged property, thereby being able to distinguish them.

In practice, the concept of “mortgaged property” is quite familiar because we often hear it when we need to make bank loans. In contrast, we rarely hear “collateral ” and are often confused when distinguishing between these two types of assets.

In this article, to help you better understand the collateral and mortgaged property, thereby distinguishing them, PL & Partners Law Firm will have specific comparisons.

1. WHAT IS COLLATERAL? WHAT IS A MORTGAGED PROPERTY?

Collateral is a property that the securing party uses to secure the performance of a civil obligation towards the secured party. For example, Mr. A and Mr. B signed a contract to buy and sell real estate. Accordingly, Mr. A deposited an amount of VND 500 million to secure the purchase and sale. This amount of 500 million is the collateral.

The mortgaged property is a form of collateral. Accordingly, the mortgagor will use the property under his/her ownership to provide security to perform the obligation without handing over the property to the other party (the mortgagee). For example, Mr. A borrowed 500 million from the bank and mortgaged his house to secure his debt repayment obligation. In this situation, the house is a mortgaged property.

Both collateral and mortgaged property are used to secure one party's performance to the other. — *Both collateral and mortgaged property are used to secure one party’s performance to the other.*

2. SIMILARITIES BETWEEN COLLATERAL AND MORTGAGED PROPERTY.

Both are assets used to ensure that an individual or organization will be able to perform their civil obligations towards the obligee, such as debt repayment obligations, performance obligations, etc.
When used as security for the performance of an obligation, both types of assets remain in possession of the mortgagor or securing party. When an obligation is not performed in accordance with the agreed commitment, the property will be handled by the mortgagee or the secured party to deduct the obligation that the other party breached.

3. DIFFERENCES BETWEEN COLLATERAL AND MORTGAGED PROPERTY.

To clearly distinguish between these two types of assets, please refer to the following table:

Collateral	Mortgaged property
The collateral includes many types of assets such as deposited, pledged, escrowed property, etc.	Is a type of collateral
Except for mortgaged and pledged properties that are real estate, other collaterals are enforceable against third parties without being registered.	The mortgaged property is effective against third parties from the time of registration
Different types of collateral will be regulated with different procedures and handling methods. E.g.: For escrowed property, the bank will keep them. For the deposited property, the depositee will hold the depositor’s property. For pledged property, the pledgee will hold the pledgor’s property, etc.	The mortgagee allows the mortgagor to continue holding and using the mortgaged property.

Thus, PL & Partners Law Firm has shared with you about collateral, mortgaged property as well as the distinction between these two types of assets.

Hope the above information will be useful to you.

If you need further legal assistance, please contact us at:

PL AND PARTNERS LAW FIRM

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The article is based on the applicable law at the time of writing and may no longer be appropriate at the time you read it due to changes in laws. Therefore, the article is for reference only.