Falling behind on your loan can result in financial penalties. Depending on the language of the loan agreement, the lender may label the loan as in default. If so, your credit score will be negatively impacted. In extreme cases, a lender may even pursue litigation.
Homeowners that find themselves navigating these issues have options. Three examples that can help homeowners who are behind in loan payments include:
- Pay off missed payments. If you have missed a couple of months’ worth of loan payments, see if you can pay off this debt with the lender in exchange for forgiveness of any associated penalties. Although this will still result in a large payment, it can reduce the overall amount owed if the lender agrees to forgive penalties.
- Loan modification. If you cannot pay back the loan as it is currently written, a loan modification may be an option. This process involves negotiations between the homeowner and lender to adjust the terms of the loan. In most cases, a homeowner must establish that their financial situation has changed and resulted in a situation where the continuation of the mortgage as originally written would result in a “hardship” for the homeowner.
- Settle. If you had fallen into default, you may be able to offer the lender a settlement. This would involve a large payment to settle the amount in default.
Whether looking to find a way to keep your home because you received a foreclosure notice or concerned about missed payments, it is wise to act promptly. Once missed payments result in a foreclosure notice the homeowner has precious little time to save their home. Contact an attorney experienced in loss mitigation and foreclosure prevention to discuss your options.