What happens if I can’t repay the loan and the collateral is seized?

If you cannot repay the loan, the lender has the right to seize and sell the collateral to recover their losses. The proceeds from the sale will be used to pay off the remaining balance of the loan. If the sale of the collateral does not cover the outstanding debt, you may be responsible for paying the remaining balance.

In some cases, the lender may be willing to work out a payment plan or negotiate a settlement to avoid the need to seize and sell the collateral. However, it is important to understand that using collateral to secure a loan creates a legal obligation to repay the loan, and failure to do so can have serious consequences.