The offer of pledging real property to secure a loan is called what?

Hypothecation refers specifically to the practice of pledging real property as collateral to secure a loan while allowing the borrower to retain possession and use of the property. In a hypothecation arrangement, the borrower does not transfer ownership of the property to the lender; instead, the property serves as security for the loan. This means if the borrower fails to meet their repayment obligations, the lender has the right to take possession of the property through foreclosure.

Encumbrance refers to any claim or lien on a property that affects its use and includes mortgages as well as easements, which is broader than just the act of securing a loan. Amortization describes the process of gradually paying off a loan through scheduled payments over time, which does not relate to the initial act of securing the loan with property. Foreclosure is the legal process through which a lender can take possession of the property when the borrower defaults, but it is not the act of securing the loan itself. Thus, the term that correctly describes the offer of pledging property to secure a loan is hypothecation.