Repossession is a legal process through which a lender takes back possession of the collateral, such as a car or home, that was used to secure a loan or debt that is in default. When a borrower defaults on a loan or debt, the lender has the right to repossess the collateral in order to recover the amount owed.
In the case of a car loan, for example, the lender may send a repossession agent to take possession of the car if the borrower has missed several payments. The car will then be sold at auction to recover the outstanding debt. In the case of a mortgage, the lender may foreclose on the property and sell it to recover the debt.
Repossession can have serious consequences for the borrower, including damage to their credit score, loss of the collateral, and potentially even legal action. To avoid repossession, it is important to make payments on time and in full. If borrowers is struggling to make payments, they should contact their lender as soon as possible to discuss options such as a payment plan or loan modification.