Repurchase agreement

A repurchase agreement, also known as a “repo”, is an agreement between two parties. One party will lend money to another party and in exchange, the other party will agree to “re-purchase” the loaned money at a later date for a slightly higher price. This higher price is called the “interest” and it is the way the lender makes money from the loan. Repurchase agreements are usually used by banks to get money quickly without having to do too much paperwork.