Covered loans – is there something to fear?

The pledge is one of the solutions that effectively protect the interests of creditors (e.g. companies providing non-bank loans). In colloquial language, it is sometimes said that some debt has been contracted, for example, “against real estate collateral”. This wording is incorrect and misleading from a legal point of view.

In fact, the pledge is a completely different solution than the mortgage and applies only to movable items (e.g. machines and cars). This fundamental difference between pledges and mortgages is not the only aspect worth knowing.

In our article, we present basic information about the pledge, which is useful not only for clients of loan companies. Pledges can quite often be found, for example, by enterprises that are looking for an investment loan and people who take out a car loan.

The pledge applies only to the movable or transferable rights of the debtor …


The most important rules of the pledge have been regulated on the Civil Code (CC) cards. In the case of a special type of pledge (so-called registered pledge), the Act of December 6, 1996, shall apply (Journal of Laws 1996 No. 149 item 703). According to the Civil Code, a pledge is a limited property right (similar to the use, servicing, mortgage and cooperative ownership right to the premises).

A characteristic feature of these rights and liens is that they limit the debtor’s right to property. In the case of a pledge and mortgage, such a limitation protects the interest of the creditor, i.e. the person lending money or selling products/services.

The main difference between a pledge and mortgage is that the first law applies to mobility (i.e. non-land, building permanently connected with land or a separate part Such a building), while mortgages can only be established on real estate.

In practice, it is also possible to establish a pledge on transferable rights (e.g. on shares or the right to a trademark). This solution is used much less frequently than traditional pledge on movable property.

Thanks to the pledge, the creditor can enforce debt much faster


The similarity between the pledge and the mortgage is due to the fact that both rights have so-called accessory characters. They cannot exist separately from the secured debt. Therefore, repayment of the liability results in the termination of the pledge or mortgage. Until repayment, the creditor may pursue his claims from the person who bought the item encumbered with the pledge.

That is why lawyers sometimes say that “pledge a lien for a sold item”. The same rule also applies to mortgages. If the creditor exercises his right and takes over the debt encumbered with the pledge against his debts, then his current owner will be able to cover the losses from the person who was the owner of the item when it was lined. Identical rules for subsequent settlements also apply to real estate encumbered with mortgages.

Guarantee of satisfaction of your claims after the sale of things is not the only benefit for the creditor, which results from the establishment of a pledge. It is worth realizing that the creditor (pledgee) has priority over other entities during the execution of assets of an insolvent debtor (pledgee).

The said priority of the pledge does not apply only to benefits which, pursuant to the Act, are enforced on specific terms (costs of enforcement, maintenance, outstanding remuneration for work).

Thanks to the pledge, you can guarantee the right to take over and sell a specific component of the debtor’s assets. Moreover, this right does not expire after the limitation period. In such a situation, the creditor (pledgee) will no longer receive interest and other incidental benefits (e.g. compensation for improper performance of the obligation), but will still have the right to take over the property.

The Civil Code indicates that a contract is required to establish a pledge (not necessarily in an oral form). The pledgee must also hand over the item to the pledgee. The parties may, however, agree that the pledged item will return back to the owner (as part of the loan).

The registered pledge requires a written agreement and an entry in the register


It is worth knowing that a registered pledge, which was regulated in a separate act, allows the debtor to use the pledged object (without the necessity of lending it later from the creditor). That is why the registered pledge is often used, among others, by banks providing car loans.

The establishment of a registered pledge may be decided by any two persons having the legal capacity (similarly as in the case of the pledge regulated only by the Civil Code). You should also pay attention to the fact that in the agreement on the registered pledge, the debtor may undertake not to dispose of the encumbered item. This provision is not valid if the parties chose a simple lien (regulated only by the Civil Code).

Pursuant to separate regulations, a registered pledge agreement must be in writing. The said agreement may relate to a movable property having a specific value and transferable property rights, with the exception of:

  • rights that can be encumbered with a mortgage
  • receivables from established mortgages
  • seagoing ships and ships under construction that may be subject to a maritime mortgage

Burn loan installments by up to 30%. 

Burn loan installments by up to 30%. 

Due to legal requirements, all registered pledges should be disclosed in a special court register. An open register of pledges is run by business departments in the district courts (competent for the seat of the pledgee). Unfortunately, you have to pay for their services. Activities related to the pledge register currently cost:

  • fee on an application for entry in the pledge register – USD 200
  • fee on an application for amendment to the pledge register – USD 100
  • fee on an application to remove a pledge from the register – USD 50

It is worth mentioning that all given fees are paid by the applicant. It can be both a pledgee and a pledgee.

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