Repo, short for repossession, occurs when a lender takes back an item that was financed, usually due to the borrower's failure to make payments. This process often applies to items like cars, homes, or other valuable assets. When a borrower defaults on their loan, the lender has the legal right to reclaim the property to recover their losses. The repossession process typically involves notifying the borrower and may include a period for them to catch up on payments. If the borrower cannot pay, the lender may send a repo agent to retrieve the item. Repossession can negatively impact the borrower's credit score and financial future.