A security device by which a borrower guarantees payment by delivering collateral to the lender.

• A. Bailor
• B. Consignee
• C. Consignor
• D. Pledge

Answer: (D)

A pledge is a security arrangement in which the borrower guarantees payment by delivering collateral to the lender. The debtor places possession of personal property in the hands of the creditor to secure the obligation, and the lender keeps that collateral until the debt is satisfied. If the borrower defaults, the lender has the right to sell the collateral to recover the owed amount; if the debt is paid, possession is returned to the borrower. This use of possession and security over personal property distinguishes a pledge from other concepts.

Bailor and bailee involve a bailment relationship where property is entrusted for a purpose but not necessarily to secure a loan. Consignor and consignee relate to transfer of goods for sale or handling, not to securing debt with collateral. Thus, delivering collateral to the lender to guarantee payment fits a pledge.