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What is meant by the creation of charge in the context of secured loans?
What is meant by the creation of charge in the context of secured loans?
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Creating a charge makes a loan legally secured, protecting the lender in case of borrower default.
Updated On: Jan 14, 2026
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Solution and Explanation
In secured lending, a charge creation legally establishes the lender's claim over a borrower's collateral. This secures the lender's ability to seize the asset should the borrower fail to meet obligations.Charge Classifications:
Fixed Charge: Appertains to tangible, permanent assets such as real estate or equipment. Sale of these assets necessitates lender consent.
Floating Charge: Covers dynamic assets like stock or accounts receivable, which are subject to change.
Registration of the charge with the Registrar of Companies (RoC) under the Companies Act is mandatory for legal enforceability. This safeguards the lender's financial interest and establishes their priority in insolvency proceedings.
Fixed Charge: Appertains to tangible, permanent assets such as real estate or equipment. Sale of these assets necessitates lender consent.
Floating Charge: Covers dynamic assets like stock or accounts receivable, which are subject to change.
Registration of the charge with the Registrar of Companies (RoC) under the Companies Act is mandatory for legal enforceability. This safeguards the lender's financial interest and establishes their priority in insolvency proceedings.
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