Foreclosure is often defined as a set of legal proceedings that are initiated by the creditors or lenders, in order to repossess pledged assets of the borrower, for recovering the losses that arise from default payments. In certain cases, it so happens that we borrow loans or avail credit, as we are short of cash.
While using this credit, the borrower of the money has to pledge a collateral or security with the lender. It means that if the borrower is unable to pay back the lender within a specific period of time, that lender has authority to confiscate and sell off the pledged asset to recover losses.
This process is termed as a foreclosure and it is applicable to any kind of collateral. However nowadays, the term is generally used in the context of real estate and property loans.
Common Reasons for Foreclosure
- Unexpected loss in business
- Sudden illness or an accident
- Loss of second income
- Lay-offs by the employer
- Sudden insolvency of the company that one is working in
- Negative and sad events in the family such as death or divorce
Ways to Stop Foreclosure of a Property
There are some easy and possible methods to stop foreclosure. One needs to understand, accept, and assess the situation before constructing a policy and implementing a strategy. Here are some tips that will help you to overcome this situation.
- Keeping a Tab on Installments: One way is to keep a tab on installments, right from the beginning. This strategy has to be followed right from the moment when you avail the loan. Setting aside money from one's periodic income, before spending any money always helps a lot.
- Mortgage Lender: It often helps in stopping foreclosure of property, if one talks to the loan lender. Often, the lenders themselves increase the time period of the loan and also charge a certain fine that is quite reasonable. This strategy will help you buy time.
- Consolidation Loan: This is a very good option to get financial help to avoid foreclosure. The only condition required in order to get this loan is that you should have a good credit history. Sometimes, you can also club some other loans, like an auto loan or a student loan with the consolidation loan.
- Curb Expenditure: One of the most patience-testing methods is to curb unnecessary expenses. You will be surprised by the amount that you are able to save using this strategy.
- Acting Early: This is the best policy which includes taking the right decision at the right time. There are a lot of different options to bring in financial help to stop foreclosure. Some of the mortgage lenders also suggest declaring bankruptcy.
- Sale of Property: This option can be used to prevent foreclosure of the property. The market prices of all real estate always rise and fall. If your property price is greater than the total amount of the loan, it's advisable to sell the property with the consent of your lender. This way, you have a reasonable amount of money and the loan is also repaid.
To prevent a situation that is similar to foreclosure, it is always wise to make timely payments while repaying a loan, and also have a good credit history, in order to avail other loan options like refinance or consolidation loan.