What happens if I can't pay back the loan with collateral?

If you are unable to pay back a loan secured by collateral, the lender may take possession of the collateral to recover their losses. This process is known as foreclosure or repossession, depending on the type of collateral.

For example, if you have used your car as collateral for a loan and you default on the loan payments, the lender may repossess the car to recover their losses. Similarly, if you have used your home as collateral for a loan and you default on the loan payments, the lender may initiate foreclosure proceedings to take possession of the property.

It's important to note that the specifics of the repossession or foreclosure process may vary depending on the type of collateral and the terms of the loan agreement. In general, however, if you are unable to pay back a loan secured by collateral, you run the risk of losing the asset used as collateral.