Hypothecation

Posted in Finance, Accounting and Economics Terms, Total Reads: 2047
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Definition: Hypothecation

Hypothecation is the exercise in which a borrower holds a collateral against the loan that he has borrowed.

The lender has the right to undertake the possession of the collateral if the borrower defaults or fails to make the repayment of the loan with the interest amount.

An example is the case of a mortgage where the borrower’s house becomes a collateral until the mortgage loan is paid off.

 

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