If you are five minutes away from applying for a secured loan or if you are just considering it, read about a couple of potential pitfalls that can take you off guard during the payment period. One shouldn’t think that lenders would shut their eyes to the borrower’s late loan payments or non-payments and can seize your house if it serves as a security for your loan.
So, this is the pitfall number one you might be confronted with. In fact, foreclosure is certainly one of the most heart-breaking and dramatic outcomes of taking out secured loans. In case your car, yacht are seized, this is called repossession. Not all borrowers know that their assets can be subject to repossession due to late payments. They might think that repossession can be initiated only in case they can no longer make repayments, but they are greatly mistaken.
However, lenders wouldn’t jump for joy if borrowers force them to initiate foreclosure and repossession. Such events translate into undesirable publicity for banks and numerous checks by regulators. No bank would like this. Thus, we made it clear that foreclosure and repossession bring about problems not only for the borrowers, but also for loan providers. If you need to manage through tough times and can’t make repayments in time, call the lenderbank and explain your situation.
If you have been given a mortgage (a large amount for the acquisition of a new house), the bank will probably be understanding and excuse your nonpayment for some time. However, when you finally restart your payments, the lender may ask you to pay additional money as a kind of penalty.
Then there can be a problem associated with refinancing. You could obtain a refinancing loan to repay your debt in time. Consequently, you’ll owe a much larger amount, but the repayment term will be much longer. Of course, it’s better to avoid refinancing loan at all, but if you are driven to the wall, refinancing gives you so much needed time and helps you keep the house from foreclosure. Refinancing is beneficial only when you temporarily can’t afford making loan repayments regularly. If your financial problem seems to last for a long period of time, don’t even think about refinancing.
Finally, the worst scenario is when foreclosure cannot be avoided. Some borrowers might persuade the lender into an agreement about putting off the terms of foreclosure or to being given extra time to make repayments. But in many cases the best option for borrowers who face foreclosure is to sell their house to repay the loan. After all, it’s much better than to go through foreclosure. One more thing you should also be aware of is that no borrower loses their house at once. In most cases it’s a gradual process and borrowers are given some time to make payments. The borrower has the right to discuass the terms of reinstatement with the lender. The lender determines the cost of your house and your payment abilities.
When it comes to selling a house, it can get really complicated! If the money you got from selling your house cannot cover your outstanding loan debt, the lenders will suggest that you file an application for the reinstatement program intended to help you repay the rest to the lender. In case you sell your house for a much higher price, you will lose your house rather fast because no reinstatement program would be offered to you.
To avoid unpleasant outcomes of taling out secured loans, you should be well informed about all the pitfalls associated with them. In addition, you should go to a good lawyer and check out all the terms of your agreement. You won’t regret it.