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LSDefine
Simple English definitions for legal terms
repo
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A quick definition of repo:
Term: REPO
Definition: Repo is short for two different terms: repossession and repurchase agreement. Repossession means taking back something that was bought because the buyer did not pay for it. A repurchase agreement is when someone sells something with the promise to buy it back later at a higher price.
A more thorough explanation:
Definition: Repo (short for repurchase agreement) is a financial transaction where one party sells an asset (usually securities) to another party with a promise to buy it back at a later date. Repo can also refer to the act of repossessing an asset due to non-payment.
Repossession: If you fail to make your car payments, the lender may repossess your car and sell it to recoup their losses.
Repurchase Agreement: A bank may sell government bonds to another bank with an agreement to buy them back in a week at a slightly higher price. This allows the first bank to raise cash quickly while the second bank earns a small profit.
These examples illustrate the two different meanings of repo. In the first example, repo refers to the act of repossessing an asset due to non-payment. In the second example, repo refers to a financial transaction where one party sells an asset with a promise to buy it back at a later date.