To “hypothecate” is to pledge property or assets as collateral for a debt without transferring ownership to the creditor. This term is commonly used in financial contexts, particularly in secured lending transactions where borrowers offer specific assets, such as real estate or securities, as security for a loan. By hypothecating assets, the borrower retains ownership and possession of the pledged property but grants the creditor the right to seize and sell the assets in the event of default on the loan. Hypothecation allows borrowers to access financing while retaining use of their assets, while providing creditors with security against the risk of default.
to pledge without delivery or title of possession.
v. from Greek for “pledge,” a generic term for using property to secure payment of a loan, which includes mortgages, pledges and putting up collateral, while the borrower retains possession.
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This glossary post was last updated: 29th March 2024.
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