While these four points can be successfully used even after your debt has gone into arrears, it is often much easier to negotiate with your lender and stop foreclosure action at the first sign of trouble. These are but a few of the methods available - more can be found in "The Simple Man's Guide to Real Estate" and your assigned mentor can assist you in facilitating them. Here, then, are a few things that you and your lender can quickly work out when you are unable to make timely payments:
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The lender can extend the loan. This is the most likely concession the lender will consent to because your loan must still be paid off in full. Though they will not admit to how often they will do this, lenders often extend loan payments well beyond their original term in order to assure full payment. A longer term will ordinarily reduce the monthly payment.
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Lenders may consider deferring payments on the principle of the loan. If your loan is at least one-third paid off, this could reduce your monthly payment enough to give you breathing room. If your loan is new, almost all of the payment is interest, and this strategy will not be of much benefit to you.
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Another possibility to stop foreclosure - Lenders can reduce the interest rate on your loan. But don't plan on it, particularly if the term of the loan is long, such as with a mortgage. Interest is the bread and butter of lending institutions, so they won't give it up unless the situation is severe. On the other hand, a lender may reduce the balance enough so that it can be paid in full, immediately. While the latter is not likely in the case of a high balance loan (such as a mortgage on a home), it can work for you in cases where the loan balance, if reduced, will be low enough for you to pay off immediately.
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While this strategy is rare due to lenders aversion of it, a lender can freeze loan payments. If the lender feels reasonably certain that your cash shortage is temporary and that he will get all that he is entitled to, he will be more willing to suspend payments as long as they are adequately secured and the freeze is only temporary in nature.
Here is another way to possibly stop foreclosure...