What causes repossession to occur?

Repossession occurs primarily as a consequence of missed payments on a loan or financing agreement, particularly for secured loans such as auto loans or mortgages. When a borrower fails to make scheduled payments, the lender has the legal right to reclaim the property or asset that was used as collateral for the loan. This process serves to protect the lender’s financial interests, as they can only lend under the assurance that they will be repaid.

Missed payments create a breach of the loan agreement, which triggers the lender's ability to initiate repossession. This means that maintaining regular payments is essential for borrowers to keep their assets.

In contrast, loan forgiveness, unexpected taxes, and increases in insurance rates don’t directly lead to repossession. Loan forgiveness might eliminate the obligation to repay a loan entirely, unexpected taxes could affect a borrower's financial situation but do not directly relate to the loan terms, and increased insurance rates, while potentially straining a budget, wouldn’t typically result in losing possession of the collateral unless they cause a chain reaction leading to missed payments.