Free Expert Guide To Handling Secured Loan Defaults!

Michelle Tuvey Michelle Tuvey | Loan Underwriter

No one takes out a secured loan with an intent to default unless engaged in criminal activity. Having said that, secured loan defaults do happen from time to time. There are occasions when an individual gets overextended and, due to loss of a job or some other unforeseen circumstance, can no longer make good on payments. Lenders may be left with no choice other than to repossess a home to cover the money owed.

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Here's hoping you never find yourself in that position. However, if you do, there are some things you need to know. For starters, bankruptcy is a last-ditch solution that requires you to be in dire straits before a court will approve it. Therefore, despite reaching a place where you just do not feel like making payments any more, you need to know that it is not going to be so easy to get out of your debts.

Ready to Default

You may find yourself in a place where you are ready to default even though you have not already done so. Secured Loan Expert urges you to stop and reconsider your plans. Secure loans do not have to go into default just because you run into financial trouble. There are ways out.

We recommend you contact your lender or lenders and explain to them your financial situation. Believe it or not, almost every lender is willing to work with consumers to avoid repossession. Why? Because repossession costs the lender considerable time and money. They would much rather work with you to recover their money than repossess. Even if that takes a long time.

By working with your lenders, you might be eligible for a form of legal protection known as the Individual Voluntary Agreement (IVA). This type of arrangement is an alternative to bankruptcy, allowing you to work out an acceptable payment plan with creditors. You might also be able to use this option if you contact lenders and they are not willing to work with you.

Lastly, consider getting some impartial debt management advice from a certified advisor or registered charity. Solving your financial problems may be only a matter of putting into practice some sound financial principles you were previously unaware of. You would be amazed how helpful good advice can be.

Already in Default

If you find yourself already in default, you are in a different scenario altogether. The first thing you need to know is that simply walking away from your debt is not reality. There will be consequences one way or the other. In a best-case scenario, the default will go on your credit record for six years, thereby hampering your ability to obtain new credit and resulting in higher interest rates and less desirable terms when you are approved.

In a worst-case scenario, the repossession and sale of your home will not raise enough money to cover both your mortgage and your secured loan. As the primary lien holder, your mortgage company would be paid first. Whatever is left would go toward satisfying the debt to the secured loan lender. You will still be responsible for paying any shortfall.

Understand that defaulting on a secured loan will have repercussions in both the short and long terms. A default on your record could impair your ability to rent a home or flat, obtain credit cards, get good rates on car insurance and even get a new job or a promotion. Defaulting is serious business that you should think long and hard about before allowing it to happen.

Thankfully, secured loan defaults are not the norm with this type of financing. That is why lenders are more willing to loan using these products. As long as you know you can afford it, a secured loan offers you the opportunity to borrow significant amounts of money against the equity in your home. Just be absolutely sure you know what you're doing before you do it.

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