UK Accounting Glossary
Hypothecation is the practice where 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 letter of hypothecation is the usual instrument for carrying out the pledge.
A collateralising arrangement in which neither the possession nor the title but only the right to sell an asset or property passes on to the creditor or lender (called a grantee). An arrangement where the grantee has the possession and right to sell, but not the title, is called pledging.
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This glossary post was last updated: 17th January 2020.