Hypothecation occurs when an asset is pledged as collateral to secure a loan. The owner of the asset does not give up title, possession, or ownership rights, such as income generated by the asset. ... A rental property, for example, may undergo hypothecation as collateral against a mortgage issued by a bank.

Which type of property can be hypothecated?

Hypothecation is done for a small amount. A mortgage is done for immovable properties like land, building, warehouse, etc. Hypothecation, on the other hand, is done for movable properties like cars, vehicles, stocks, etc.

Can hypothecated property be sold?

In the case of hypothecation, possession remains with the hypotehcator but the hypothecatee has the right to take possession of the hypothecated property and to sell it for the realisation of the debt secured by hypothecation.