Hypothecation
What Hypothecation means
A charge on a movable asset (vehicle, machinery) offered as loan security, where the borrower retains physical possession and use of the asset. The lender can seize it only on default.
Example
Your car loan RC book shows "Hypothecated to [Bank Name]" — you can drive the car but cannot sell it without the bank's NOC confirming loan repayment.
This definition is based on RBI – Master Direction on Vehicle Loans ↗. We link every figure to its primary source — see our data methodology.
Related legal & security terms
- Charge on PropertyA formal encumbrance registered with the sub-registrar or Registrar of Companies indicating that a lender holds a financial interest in the property as security for a loan.
- LienA lender's legal right to retain or claim a borrower's specific asset until the associated debt is fully repaid, preventing the asset from being transferred or encumbered.
- MortgageA charge on immovable property (land or building) created in favour of a lender as security for a loan, giving the lender the legal right to sell the property on default.
- PledgeA security arrangement where the borrower physically delivers a movable asset (gold, shares, NSC, FD) to the lender; ownership stays with the borrower but possession is with the lender.