The debtor remains the owner and retains possession of the chattel, but agrees with the creditor that the chattel be designated as 'charged' with the debt, and that it will be made available to secure repayment if the debt becomes overdue.

Historically, this type of agreement was known as a 'hypothec' or 'charge'.

From the creditor's point of view, this type of agreement provides satisfactory security because chattels of sufficient value are specifically identified as being available to be sold should the debt remain unpaid. At the same time, the creditor does not have to look after the charged things, which remain owned by, and in the possession of, the debtor. Of course there is a risk that the debtor will deal improperly with the charged assets.

From the debtor's point of view, the arrangement is attractive. They remain owner and possessor of the charged assets, and so can continue to use them. If the assets are sufficiently valuable, they can also charge them with more than one debt.