How Does a Repo Work?
Background The word repo is short for repossession. It occurs when a lender from whom you took a secured loan gets possession of the asset with which you secured the loan. Process The logic behind securing a debt with some asset (known as collateral in financial and legal circles) is so that the lender can sell off or keep the property in the event of your being unable to repay what you borrowed. In most jurisdictions, you deposit the document that constitutes ownership of the property—the title if the asset is a piece of real estate or a logbook if the property is a vehicle—with the lender when you borrow. This effectively places a lien on the asset, so you cannot sell it to someone else while you are still servicing the debt. You remain the legal owner of the asset unless you prove unable to honor your obligation to the lender, at which point the lender might be forced to start the repo process. At the end of the repo process, the lender takes possession of the asset and will sel
