Hypothecation
Pronunciation: /ˈhaɪpoʊˈðəˈkæˌtaɪən/
Hypothecation (noun)
- A legal promise that gives a lender rights to specific property if a borrower does not repay a loan.
- Pledging an asset as security while the owner keeps using it, with the lender able to claim it under set conditions.
Examples
- The bank issued a hypothecation to support the loan-backed security market.
- Investors bought hypothecation because it was linked to loan payments.