Complete glossary of car repossession, auto loan, and debt collection terms

Understanding the language lenders, debt collectors, and repo agents use is the first step to protecting your rights. This glossary explains every term you'll encounter when dealing with car loans, repossession, and debt collection—in plain English.

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A

Account Default

When you fail to meet the terms of your loan agreement, typically by missing payments. Default can trigger repossession and damage your credit score.

Acceleration Clause

A provision in your loan contract allowing the lender to demand immediate payment of the entire remaining balance if you default. This is often triggered before repossession.

Account Number

The unique identifier for your auto loan account with your lender. You'll need this when calling to negotiate or make payments.

Amortization

The process of paying off a loan through regular payments over time. Each payment includes both principal and interest.

Annual Percentage Rate (APR)

The yearly cost of your loan, including interest and fees, expressed as a percentage. A 5% APR means you pay 5% of the loan amount annually in interest and fees.

Auto Auction

Where repossessed vehicles are sold, usually to dealers. These can be public (you can attend) or private (dealers only). The sale price affects your deficiency balance.

Auto Title

The legal document proving ownership of your vehicle. Your lender holds the title until you pay off the loan. See also: Title.

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B

Balloon Payment

A large final payment due at the end of some auto loans. If you can't afford it, the lender may repossess the car.

Bankruptcy

A legal process that can stop repossession temporarily (automatic stay) and potentially discharge debt. Chapter 7 liquidates assets; Chapter 13 reorganizes debt into a payment plan.

Breach of Peace

Illegal repossession tactics, such as using force, threats, breaking into locked garages, or causing a disturbance. Repo agents must avoid breach of peace or the repossession may be illegal.

Business Day

Monday through Friday, excluding federal holidays. Many notice periods (like right-to-cure) are measured in business days.

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C

Charge-Off

When a lender writes off your debt as uncollectible (usually after 180 days of non-payment) for tax and accounting purposes. You still owe the money, and it severely damages your credit.

Collateral

Property (in this case, your car) that secures a loan. If you default, the lender can seize the collateral.

Collection Agency

A company hired by your lender to collect debt. They may contact you, threaten legal action, or negotiate settlements. Governed by the Fair Debt Collection Practices Act (FDCPA).

Commercially Reasonable Sale

A requirement that lenders sell repossessed vehicles for a fair market price in a commercially reasonable manner. If they don't, you may challenge the deficiency balance.

Co-Signer

A person who agrees to repay your loan if you default. Repossession affects their credit too, and lenders can sue them for deficiency balances.

Credit Bureau

Agencies (Equifax, Experian, TransUnion) that collect and report your credit history. Late payments and repossession are reported here and lower your credit score.

Credit Report

A detailed record of your credit history, including loans, payment history, and repossessions. Lenders review this before approving loans.

Credit Score

A number (typically 300–850) representing your creditworthiness. Repossession can drop your score by 100+ points.

Cure the Default

To bring your account current by paying all past-due amounts, fees, and charges. Some states give you a "right to cure" before repossession.

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D

Default

Failure to meet loan obligations, usually by missing payments. This gives the lender the legal right to repossess your car.

Deficiency Balance (Deficiency Judgment)

The amount you still owe after your car is repossessed and sold, if the sale price is less than your loan balance plus fees. For example: you owe $15,000, the car sells for $10,000, you have a $5,000 deficiency.

Delinquency

Being late on a payment. Typically, you're delinquent after 30 days, and seriously delinquent after 90 days.

Depreciation

The loss of value in your car over time. New cars can lose 20–30% of value in the first year, which contributes to being "underwater" on your loan.

Down Payment

The upfront amount you pay when buying a car. A larger down payment reduces your loan amount and monthly payments.

Due Date

The date your monthly payment is due. Missing this date starts the delinquency process.

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E

Equity

The portion of your car you actually own. Calculated as: current value minus loan balance. Positive equity means you could sell the car and pay off the loan; negative equity means you're underwater.

Escrow

An account where funds are held by a third party until certain conditions are met. Rarely used in auto loans but may apply in loan modifications.

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F

Fair Credit Reporting Act (FCRA)

Federal law regulating credit reporting. Gives you the right to dispute inaccurate information, including wrongful repossession reports.

Fair Debt Collection Practices Act (FDCPA)

Federal law protecting consumers from abusive debt collection practices. Debt collectors cannot harass, threaten, or lie to you.

Finance Charge

The total cost of borrowing, including interest and fees, over the life of your loan.

Forbearance

A temporary agreement where your lender pauses or reduces payments. This can prevent repossession but interest usually continues to accrue.

Foreclosure

Usually refers to home repossession, but sometimes used interchangeably with auto repossession.

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G

Gap Insurance (Guaranteed Asset Protection)

Insurance that covers the "gap" between what you owe and what your car is worth if it's totaled or repossessed. Can save you from owing a deficiency balance.

Garnishment (Wage Garnishment)

A court order allowing your lender or debt collector to take money directly from your paycheck to satisfy a deficiency judgment.

Grace Period

A short window (typically 10–15 days) after your due date before a late fee is charged. Does NOT prevent the account from being reported as delinquent after 30 days.

Guarantor

Similar to a co-signer; someone who promises to repay your loan if you default.

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H

Hardship

Financial difficulty (job loss, medical emergency, etc.) that prevents you from making payments. Documenting hardship can help you negotiate with your lender.

Hardship Letter

A written explanation of why you can't make payments and a request for assistance (deferment, modification, etc.). Generate one here.

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I

Impound

Another term for repossession. Your car is "impounded" by the lender or repo agent.

Installment Loan

A loan repaid in regular payments (installments) over time. Most auto loans are installment loans.

Interest

The cost of borrowing money, calculated as a percentage of your loan balance (the APR). You pay interest in addition to the principal.

Interest Rate

The percentage used to calculate interest charges. A 6% interest rate means you pay 6% annually on the outstanding balance.

Involuntary Repossession

When the lender takes your car without your permission (but legally) because you defaulted. Contrast with voluntary repossession.

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J

Judgment

A court order stating you owe a debt. If you lose a deficiency lawsuit, the court enters a judgment, which can lead to wage garnishment or liens.

Judgment Lien

A legal claim against your property (home, bank accounts, etc.) resulting from a court judgment for unpaid debt.

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L

Late Fee

A charge added to your account when you miss a payment deadline. Typically $25–$50 per missed payment.

Lender

The bank, credit union, or finance company that loaned you money to buy your car. They hold the title until you pay off the loan.

Lien

A legal claim on your car by the lender. The lien is released when you pay off the loan. Without paying off the lien, you can't sell or transfer the car.

Lienholder

The lender or entity that holds a lien on your vehicle.

Loan Modification

An agreement to change the terms of your loan—such as extending the term, lowering the interest rate, or reducing the balance—to make payments more affordable.

Loan Term

The length of time you have to repay the loan, typically 36, 48, 60, or 72 months.

Loan-to-Value Ratio (LTV)

The ratio of your loan balance to your car's value. An 80% LTV means you owe $16,000 on a car worth $20,000. Over 100% means you're underwater.

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M

Maturity Date

The date your loan is fully paid off.

Monthly Payment

The amount you owe each month, typically including principal, interest, and sometimes insurance or taxes.

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N

Negative Equity

Owing more on your car than it's worth. Also called being "underwater" or "upside down." Makes refinancing or selling difficult.

Notice of Default

A letter from your lender stating you're in default and warning of potential repossession.

Notice of Intent to Sell

A notice sent after repossession informing you when and where your car will be sold, and giving you a final chance to redeem or reinstate.

Notice of Right to Cure

A legally required notice in some states giving you a set period (e.g., 20 days) to catch up on payments before repossession.

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O

Outstanding Balance

The total amount you still owe on your loan, including principal, interest, and fees.

Overdue

Past the payment due date. Synonymous with delinquent.

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P

Payment Plan

An agreement with your lender to catch up on missed payments over time, instead of paying all at once.

Personal Property

Items inside your car (phone, clothes, documents, etc.). You have the right to retrieve these after repossession; the lender cannot keep or sell them.

Pre-Repo Notice

A notice sent before repossession informing you of default and potential repossession. Not required in all states.

Principal

The original amount borrowed, not including interest or fees. Each payment reduces the principal.

Private Sale

When your lender sells your repossessed car to a dealer or individual without a public auction. Must still be commercially reasonable.

Promissory Note

A written promise to repay the loan. Part of your loan contract.

Public Auction

An auction open to the public where repossessed vehicles are sold. You have the right to attend and bid on your own car in some states.

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R

Redemption (Right of Redemption)

Your right to get your car back by paying the full loan balance plus fees, typically within 10–30 days after repossession.

Refinancing

Replacing your current auto loan with a new loan, ideally with better terms (lower interest rate, lower payment). Can prevent repossession if done early.

Reinstatement (Right to Reinstate)

Your right to get your car back by paying all past-due amounts plus fees (not the full balance). Cheaper than redemption but only available in some states.

Repossession (Repo)

When your lender takes back your car due to loan default. Can be voluntary or involuntary.

Repo Agent (Repo Man)

A person or company hired by the lender to physically retrieve your car. Must follow "no breach of peace" rules.

Repossession Fee

Charges for towing and storing your car after repossession. You must pay these to reinstate or redeem.

Right to Cure

Your legal right in some states to bring your account current within a set timeframe (e.g., 20 days) after receiving notice, preventing repossession.

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S

Secured Loan

A loan backed by collateral (your car). If you default, the lender can seize the collateral. Most auto loans are secured.

Security Agreement

The part of your loan contract giving the lender a security interest in your car, allowing repossession if you default.

Security Interest

The lender's legal right to repossess your car if you don't pay.

Self-Help Repossession

When a lender repossesses your car without going to court, as allowed in most states. Must still follow "no breach of peace" rules.

Settlement

An agreement to pay less than the full amount owed. You may negotiate a settlement on a deficiency balance, but it affects your credit.

Skip Payment

A lender-approved delay or skipped payment, moving it to the end of your loan. Often granted during hardship.

Storage Fees

Charges for keeping your repossessed car in a lot or impound yard. Accrue daily and must be paid to reinstate or redeem.

Subprime Auto Loan

A loan for borrowers with poor credit (typically scores under 620). These loans have higher interest rates and stricter terms, making default and repossession more likely.

Surrender (Voluntary Surrender)

See Voluntary Repossession.

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T

Title

The legal document proving ownership of your car. Your lender holds it until you pay off the loan, then releases it to you.

Title Transfer

The process of transferring ownership. After paying off your loan, the lender releases the title, and you become the sole owner.

Trade-In

Selling your current car to a dealer as part of buying a new one. If you owe more than the trade-in value, the negative equity rolls into your new loan.

Truth in Lending Act (TILA)

Federal law requiring lenders to disclose loan terms (APR, fees, total cost) clearly before you sign.

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U

UCC (Uniform Commercial Code)

A set of laws governing commercial transactions, including repossession. UCC Article 9 covers secured transactions and repo rules in most states.

Underwater (Upside Down)

Owing more on your car than it's worth. Same as negative equity. Makes it hard to sell or trade in the car.

Unsecured Debt

Debt not backed by collateral (like credit card debt). A deficiency balance can become unsecured debt after repossession.

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V

Vehicle Identification Number (VIN)

A unique 17-character code identifying your car. Lenders use this to track and verify your vehicle.

Voluntary Repossession (Voluntary Surrender)

When you return your car to the lender because you can't afford payments. Less damaging to your credit than involuntary repossession but still hurts your score and you may still owe a deficiency.

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W

Wage Garnishment

See Garnishment.

Warranty

A guarantee covering repairs for a certain period. Factory warranties may still apply after repossession if the car is resold.

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Need More Help?

• Repo Countdown Tool - See how much time you have
• Hardship Letter Generator - Create a letter to your lender
• Debt Relief Quiz - Find options that fit your situation
• State-by-State Laws - Know your rights
• Your Rights Guide - Understand consumer protections

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