Posted in Finance, Accounting and Economics Terms, Total Reads: 440
When a property is taken back from a person, which was once used as collateral or rented to or leased by a financial institution, it is said to be repossessed. The activity of taking back is known as repossession. Collateral is the thing kept as security or mortgage on some loan or borrowing. The financial institution has full right to take its property back from the person who has its right of possession. The financial institution is said to have a right of ownership.
Different jurisdictions have different laws of repossession for different types of properties. In marketing, when a person buys goods on credit, the money loaned to the person is secured by a collateral or mortgage. If the person fails to return the money, the ownership right of the mortgage is now transferred to the lender. The lender may choose to sell the security if he wishes so.
The lender can repossess the goods under the following circumstances:
a. The good is taken on credit against collateral.
b. The borrower has defaulted or not followed the loan agreements.
c. The borrower has been given a notice to repay the debt within a limited period of time and the borrower fails to do so.
If the borrower has followed the loan agreements or reacted to the notice by the mender, as expected, the lender has no right to repossess the property.
Once the property is repossessed, the borrower has to take a written statement from the lender which consists of the following:
a. The date the goods or property were repossessed.
b. The estimated cost of the property.
c. The enforcement expenses.
d. A statement of the borrowers’ rights.
e. The lender has no right to sell the goods in the notice period.
If the property is repossessed due to the fulfilment of any of the above mentioned circumstances, and then sold by the lender, the borrower has no rights over it.
The repossession rights are different when it comes to a car.