What can a lender do if a borrower defaults on a secured loan?

If a borrower defaults on a secured loan, the lender has the right to repossess the collateral that was used to secure the loan. This process is part of the security agreement made between the borrower and lender, where the collateral acts as a guarantee for repayment. In the event of default, the lender can recover their losses by taking possession of the collateral, which could be property, a vehicle, or other valuable assets that were pledged as security for the loan. This right to repossess reflects the nature of secured loans, where the risk is mitigated by having the collateral to fall back on if the borrower fails to meet their repayment obligations.

Other options, such as negotiating a lower interest rate or extending the loan term automatically, are not standard practices in the case of a default situation. Canceling the loan without consequences does not occur, as there are typically legal and financial ramifications following a default, especially for secured loans.