LoansFinancial Glossary
Hypothecation
Definition
A charge created on a movable asset (such as a car, equipment, or inventory) to secure a loan without transferring ownership or possession to the lender. If you take a car loan, the car is hypothecated to the bank — you use it, but the bank has a legal claim until the loan is repaid.
Why It Matters
Hypothecation is noted on your vehicle's RC (Registration Certificate). You cannot sell the vehicle without the lender's NOC (No Objection Certificate). After fully repaying your car loan, ensure you get the hypothecation removed from the RC — otherwise, you will face problems during resale.