Definition
A lender taking back collateral, most commonly a car, after missed payments on a secured loan. In many states it can happen without a court order once the loan is in default, and the borrower can still owe money afterward.
Why it matters
Repossession does not erase the debt: the car is sold at auction, often below market value, and the borrower owes the gap plus fees while the mark sits on the credit report for seven years. Calling the lender before missing payments usually opens cheaper options than going silent.
Example
A borrower owing $14,000 stops paying; the car is repossessed and auctioned for $9,000. After $1,000 of fees, they owe a $6,000 deficiency balance with no car to show for it, and the repossession drags on their credit for years.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.