What context can I use each word in?
Learn when and how to use these words with these examples!
hypothecation
Example
The bank required hypothecation of the borrower's car to secure the loan. [hypothecation: noun]
Example
The borrower hypothecated his house to obtain a loan for his business. [hypothecated: verb]
collateral
Example
The bank required collateral in the form of the borrower's car to secure the loan. [collateral: noun]
Example
The borrower offered his house as collateral to obtain a loan for his business. [collateral: noun]
Good things to know
Which word is more common?
Collateral is a more commonly used term than hypothecation in everyday language and financial transactions. Collateral is a versatile term that covers a wide range of assets, while hypothecation is a more specific legal term.
What’s the difference in the tone of formality between hypothecation and collateral?
Hypothecation is a more formal term used in legal and financial contexts, while collateral is used more broadly in finance, real estate, and other industries, making it suitable for both formal and informal contexts.
