Imagine the awkward situation, when you have gave your hard-earned money to someone who was needy, but later he expresses his inability to repay the loan amount. Definitely you don’t feel great and same is with other lenders. Do you have any fair idea about foreclosure? Here I am going to let you know what is foreclosure. Along with the process of repayment through which thousands of lenders get their loan money back. Especially in India, the situation is worse and the idea of foreclosure has turned up as a boon for these lenders.
A number of investors, entrepreneurs and other business have faced and are facing the same situation. Many times it become difficult to get their hard-earned loan money back. This information will really help you to understand how to get money back from borrowers.
What is Foreclosure?
“Foreclosure is a legal process to help the lenders to get their loan money back. This occurs then borrower stops making payments or expresses his inability to repay the loan amount”. This is a situation in which a borrowing is unable to make payments, allowing the lender seizing the property. By law and order either borrower or lender sell the home to recover money, as mentioned in the mortgage contract.
Generally, the foreclosure process may proceed in three ways; one is judicial sale, power of sale, and the third one is strict foreclosure. In judicial sale, the whole process is controlled by judicial court. You should know rights of a loan defaulter in India if you are a borrower and unable to repay it.
First of all, the lender initiates the process with a petition for of foreclosure. Thereafter whole process goes according the orders of the court. While in power of sale, the lender has all the rights of foreclosure. Lender can seize or sell the property of borrower when he fails to make payments. Also failing to pay after multiple notifications given by lender for the same.
Strict foreclosure is different from both judicial sale and power of sale. In strict foreclosure, lender or a third party is required to file a litigation against the borrower and then the process goes ahead.
The laws and process may differ a bit according to the states. In general, one month after the borrower misses the advance payment, the person is in default and gets notified by the lender.
Three to six months after the borrower fails to pay a mortgage payment. Lender assumes that mortgage is still at fault and the borrower has not turned up the missed payments within a specified a time frame. In such case, the lender has the rights to begin to foreclose process.
If a borrower still falls to make payments, it may be much difficult to catch up. As the lender will add the penalties fees for payments that are even 10 days late.
How to Get Money Back from Borrower
There are key factors to be considered before applying for a loan. Once you have chosen the loan then you should pay loan installments regularly. If a borrower is consistently falling behind on his payments, the best thing a borrower can do is working with his lender. Usually a lender too wants to avoid foreclosure just as much as a borrower does. In many cases and is offers several payment solutions to help the borrower. These are the solutions:
In Forbearance, the lender allows / agrees the borrower to delay the payments, tacking them onto the loan balance. As lender tries to help with the borrower’s economical circumstances.
Here, the lender re-frames the borrower’s loan in order to make him better afford his monthly payments to pay timely. There are ways to get out of debt with low income which you must also know it.
In short sale process, the lender agrees to allow the borrower to sell his home for the market price. Even if it sells for less than what borrower owe, the remaining debt is forgiven by the lender.
Deed in Lieu of Foreclosure
In this situation, the borrower has to give up the rights of his home to lender. In lieu of borrower for not paying the amount of debt.
Here we have seen what is foreclosure along with how lenders get loan money back, if you can’t repay it. The best thing one can do to avoid foreclosure for his property is to act quickly. If borrower knows that he is falling behind payments, then he should contact his lender as soon as possible. Here listed are some of the common and easiest way on how thousands of lenders get their loan money back. But apart from these, lender have lot of legal rights in-case you fail to repay the loan money back to lender.
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