Also found in: Dictionary, Thesaurus, Legal, Idioms, Encyclopedia.


Copyright © 2012, Campbell R. Harvey. All Rights Reserved.


To pledge an asset as collateral on a loan without the lender taking possession of the collateral. It especially applies to mortgages: the borrower hypothecates when he/she pledges the house as collateral for payment of the mortgage, or he/she may hypothecate the mortgage in order to borrow against the value of the house. In both situations the borrower retains the house, but the lender has the right to take possession if the borrower does not service the debt. Hypothecation also occurs in trading: a broker will allow an investor to borrow money to purchase securities with those securities as collateral. The investor owns the securities but the broker may take them if the debt is not serviced, or if the value of the securities falls below a certain level. See also: Foreclosure, Margin account.

Pledged Asset

An asset that a borrower transfers to the possession of a lender as collateral for a loan. The borrower maintains ownership and all associated rights of the pledged asset. When the loan is repaid, the lender transfers possession back to the borrower. The pledged asset reduces the risk to the lender that the borrower will default, therefore possibly qualifying the borrower for some benefit, such as a lower interest rate. When buying a house, some mortgage borrowers will pledge an asset, such as stock, to the lender to qualify for a lower down payment. See also: Secured loan.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
Share pledging is generally on the higher side in sectors like -- engineering, infrastructure, textiles.
More than 25 companies saw promoter share pledging rising over 3 percentage points during September-December 2016.
As of March 2016, pledging of shares was seen in as many as 505 of the 1,514 NSE-listed companies.
Using data from a three-year longitudinal follow-up, adjusted to eliminate these differences, analysts found that pledging was associated with postponement of sexual initiation; they estimated that among youth with characteristics that indicate an inclination to pledge, 42% of those who do not pledge will initiate intercourse within a three-year period, compared with 34% of those who pledge.
The Tax Court has held that pledging personal assets is not an economic outlay sufficient to increase basis (see Luiz v.
Whatever the motivations of those now "pledging allegiance" may be, they are not, if they are citizens of the United States, inferior to their government; their government is not a lord, and it exists because their predecessors formed it to serve them.