What Does Hypothecation Mean?

10 Oct What Does Hypothecation Mean?

Hypothecation is a pledge of property as collateral for a debt when the debtor holds back the right of possession of the collateral. The debtor retains legal title to the collateral but grants the lender a lien on it. This is the case in many security interest situations, like home mortgages and car loans. Terms like hypothecation are no longer used in Article 9 of the U.C.C.–the term “security interest” is now used.

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