Banking / Finance Law
Hypothecation
A form of security where movable property is charged as collateral for a loan, without transferring possession of it to the lender.
Hypothecation is commonly used for vehicle and equipment loans, where the borrower retains and continues using the asset, but the lender holds a legal charge over it and can take possession and sell it if the borrower defaults.
This differs from a pledge, where the lender actually holds physical possession of the asset from the outset.
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