what is an example of hypothecation 
an example of hypothecation would be an investor who takes out a mortgage loan to purchase an investment property the property serves as collateral for the loan meanwhile the investor collects the rental income derived from it but if the investor defaults the lender can initiate a foreclosure proceeding to take ownership of the property the bottom linehypothecation often applies in real estate lending transactions in which a property is used to secure a loan but it can also be used in other types of loan situations as well as investing if you re entering into a loan agreement that includes hypothecation it s important to understand the potential consequences if you fail to uphold your financial obligation to the lender 