How Do I Avoid Foreclosure?
First, let’s define what foreclosure is. Foreclosure in simple terms is an order issued by a court to gain possession over a property or an asset. The action is caused by the non-payment of debt of a borrower to his or her creditor. The foreclosed property is the collateral that the debtor has presented in exchange for a loan.
Foreclosure is an option that lending institutions or creditors don’t like doing. This is actually their last option and they like to be paid with money rather than a property because it is much less complicated, but this can still be avoided. Here are the ways:
1. Pay your long overdue loan with another loan.
The loan should, as much as possible, be obtained from your family or friends, which does not have an interest. This is one way to help you settle your outstanding account and avoid foreclosure.
2. Communicate with your creditor.
A lot of people avoid talking to their creditors simply because they are ashamed or they think that their creditors cannot help them, which actually is so untrue. When you communicate with your creditor, you will have a chance to modify your loan, meaning, your loan may be reduced or you may have lower monthly repayment scheme.
3. Hand the deed of your property to your creditor.
This should be done before your property will be foreclosed. However, you have to let your creditor know of your plan beforehand and put it into writing. After your have handed over the deed of your property, there will be no more court proceedings and foreclosure order, which will not affect your credit rating that much.
4. The forbearance option.
With this option, your creditor will allow you to delay your loan payments or pay for your unpaid overdue account within a specific period of time. This is good option if you are expecting a bigger income in the future.
5. The bankruptcy option.
This is probably the most avoided option of all. When you file for bankruptcy, it will not help you get rid of foreclosure. In mortgage agreements, it is stated there that in case of failure to pay, the mortgage company can repossess the property by way of foreclosure even if you have declared yourself bankrupt. In addition, bankruptcy will reflect a negative credit rating for so many years. Before you decide to file for bankruptcy, it would be a good idea if you first ask for an advice from a credit counsellor.
6. The foreclosure option.
This is also one option that you shouldn’t allow yourself to get into for it will also pull down your credit rating in a major way wherein you will not be allowed to purchase a home in the next 2 years.