After repossession, you may still owe money if there is what kind of balance?

A deficiency balance occurs when the amount owed on a loan exceeds the amount for which the repossessed property can be sold. In terms of vehicle financing, for example, if a borrower has a car loan for $20,000 and the car is repossessed and sold for only $12,000 at auction, the borrower is still responsible for the $8,000 difference; this is the deficiency balance.

This situation arises because repossession does not erase the original debt; rather, it allows the lender to recover some of the lost value through the sale of the asset. If the sale does not cover the outstanding loan amount, the borrower remains liable for the remaining balance, which the lender can pursue through collections or legal action.

The other terms listed refer to different concepts: a credit balance typically pertains to an excess on an account, negative equity indicates a situation where the value of an asset is less than what is owed, and excess debt denotes a general scenario of owing more than one can handle. However, none of these other terms specifically describe the situation where a borrower owes a remaining balance after the asset’s repossession is sold.