The debtor remains owner of the chattel, but agrees to hand over possession of it until the debt is repaid.

Historically, this type of agreement was known as a 'pledge'.

From the creditor's point of view, this type of agreement provides satisfactory security because they have physical control of the chattel and, if the debtor defaults, the creditor may sell it, acting on behalf of the debtor. Proceeds received from the sale are applied first to discharge the debt, with the rest going to the debtor.

For the debtor the disadvantages of this type of security are, firstly, doing without the use of whatever chattel is handed over to the creditor; and secondly, that the thing can only be given to any one creditor at a time, whatever its value.