what is the difference between assignment and hypothecation The differ

QUESTION

what is the difference between assignment and hypothecation
The difference between assignment and hypothecation is discussed as below: Assignment “ An assignment generally means an action that is taken with a contract. Assignment takes place when the owner of a contract who is known as the assignor, gives or transfers a contract to another party / person , known as the assignee. The assignee then assumes all the responsibilities and benefits of the contract and from the contract . In terms of loans, assignment can relate to life insurance policies and mortgage contract which takes place from one party to another party. Mortgages and other contracts also contain provisions a few limiting or stipulating conditions for assignment. Hypothecation “ Hypothecation means creating a charge against the security of movable assets and the actual possession of¦

the security remains with the borrower . In case of a default by the borrower, the lender (i.e. to whom the goods / security has been hypothecated) will first take the possession of the security and then sell the same . Example of this type of arrangement are Car Loans where Car / Vehicle remains with the borrower but the same is hypothecated to the bank / financer. If the borrower defaults then the banks take the possession of the vehicle after giving notice and then sell the same and credit the proceeds to the loan account.

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