Pledging a movable asset (like a car, stock, or equipment) as security for a loan without transferring possession. The borrower keeps using the asset but the lender has a claim on it. If you default, the lender can seize the asset.
When you take a car loan, the car is hypothecated to the bank. You drive it daily, but the RC book shows the bank's name as hypothecation holder. If you stop paying EMIs, the bank can repossess the car.
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