Being behind on your loan payments can be a serious disadvantage because creditors come looking to repossess something that you own. Simply put, repossession happens when your creditor takes a piece of property that you have used as collateral. However, there are strict laws that govern what can be taken and what cannot be taken. So, read on as we dive into some more information on repossession of your own residence. You can also click research for more details.
What Can Be Repossessed?
Creditors can easily repossess items if your default your loan. In the case where they can repossess your item, they do not need to take the matter to court. The following are some items that can be repossessed:
* Your car – If you default your car loan, creditors have the right to repossess it without giving notice.
* Rent-to-own items – This ranges anywhere from appliances, to electronics to furniture and anything else that you are renting with the option of purchasing.
* Property used as collateral – Debts are only secured when a specific piece of property is used as a form of guarantee that the debt will be repaid. If you should fail to do so, the creditor will take your property.
What Can't Be Repossessed?
While creditors can repossess several items, there are still some things they cannot take back if you are default on your loan. However, the creditor can still take you to court for the money that is owed. The following are not liable to be repossessed:
* Property that is not set as collateral – When items are not listed as collateral, they cannot be taken away. So, if you keep paying for your items, then it will not be repossessed because it was not listed as collateral.
* Purchases made with credit cards – Credit card debt is always unsecured. Hence the agreement does not name anything as collateral.
How to Stop Repossession?
Since tons of lenders make most of their money on mortgages, they generally want to arrange an agreement where you can continue paying for your home. This saves you from having your home repossessed. However, most homeowners tend to have significant periods of time before they are left homeless. Lenders are instructed to follow various legal rules before they can take you to court.
In the instance where the court process has already started, there a chance that you can still arrange with your lender.
Why Should You Speak to A Debt Adviser?
If your home is about to be pulled away from you, it is important that you speak to an expert as soon as possible. Debt advisors can aid you in the following ways:
* Guide you to making better options
* Help as you find ways to improve your finances
* Create a solid repayment plan
* Construct your financial statements
What Does Talking to Your Lender Do?
If you have missed a mortgage payment, it is best to contact your lender right away. A conversation with your lender can do the following for you:
* You'll be able to tell them why you are in arrears
* You can also plead your case and let them know that you are working to clear these as soon as possible
* You'll easily inform them that you will be able to send them a proposal to repay them very soon
Even if your lender has already started taking the matter to court, you can still talk to them. The sooner you contact them, the better it is for you. This will also increase your chances of keeping your home.
If there is a possibility that you're unable to pay in full, it's always a good idea to still pay whatever you can. Most debt advisers will advise that it is better to pay in small amounts. When you pay in small amounts, you will be able to do the following:
* You will show that you are reliable
* Your lender will be able to trust you
* You will be able to show the lender that you are placing priority on your mortgage
* You'll also be able to accurately indicate that you are working to manage your budget
Improve Your Financial Situation
If you are stumped with mortgage arrears, it's a good idea to actively do the following:
* Pay closer attention to your outgoings and your income
* Prioritize debts and your mortgage
* Determining an affordable payment plan
Are You Thinking of Selling Your Home?
Most people tend to think that selling their home can easily cover their mortgage and their arrears. However, if you are not able to afford a repayment plan, there are assisted voluntary sales that you can look forward to. Some people even voluntarily allow the creditors to repossess their homes by simply giving them the keys and walking away.
Most debt advisors will tell you that this is the worse that you can do since it will negatively affect your credit rating. When you do this, you will be responsible for the following:
* Mortgage payments
* Repaying arrears
* Other costs like insurance
As we conclude, we have just looked at the repossession of your own residence. We have looked at what you can do to change your credit situation and we've also strongly suggested that you shouldn't voluntarily give up your residence. Doing so will still put you in tons of external debt!