Released: January 21, 2019

Help Desk FAQ

What items or things can and can’t be repossessed by lenders?

Whether your property can be taken (repossessed) depends on the type of loan you’ve defaulted on. You default when you do not fulfill the terms of the loan agreement, which includes not making payments as promised.

Secured loans name a specific piece of property to be repossessed if you default. The property used to secure a loan is called collateral. The creditor does not have to go to court and get a judgment against you before taking the collateral if you default.

A mortgage is an example of a secured loan. The home or other real property purchased with the loan money is the collateral. The repossession of a piece of real estate is known as foreclosure.

An auto loan is secured by the vehicle you purchased with the money. In addition to repossessing your car if you default, the lender may also be able to hold you responsible for any deficiency (the difference between your loan balance plus repossession fees and the amount the lender gets when it sells the vehicle).

Other secured loans include rent-to-own agreements for things like appliances and furniture; pawn shop loans; and any other loan that you secure with specific property (say, a business loan that names your paid-off car as collateral).

Unsecured loans are not “collateralized.” If you do not make payments on an unsecured loan (your credit card, for example), the creditor cannot take your property. However, the creditor can sue you to recover the money you owe. If the creditor wins the lawsuit, it may be allowed to put a lien on your property or garnish your wages.