Today We are Introducing To what is hypothecation
Hypothecation
is the practice where (usually through a letter of hypothecation) a debtor pledges collateral to secure a debt or as a condition precedent to the debt, or a third party pledges collateral for the debtor. A common example occurs when a debtor enters into a mortgage agreement, in which the debtor's house becomes collateral until the mortgage loan is paid off.
The debtor retains ownership of the collateral, but the creditor has the right to seize ownership if the debtor defaults.
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