Credit Cards And Loans - Foreclosure
Foreclosure, the word sends judders down the spine and when added to personal foreclosure, one tends to think of someone who has been a philanderer or un-astute when it comes to monetary matters. It could be assumed that some people have deliberately gone out of their way to raise credit and spent the proceeds, with no plans to pay it back.
A few years ago some of the above was probably true and 20 years ago it was likely that most of the above was true. Today Creditors (lender) try to use some of this old ill feeling to try scare Debtors (borrower) about the dangers of personal foreclosure and try to stigmatise the victim.
20 years ago accessing credit wasn’t that easy and you had to be well trusted or able to demonstrate a more than adequate ability to pay, so when a foreclosure was needed it was viewed that the borrower had reneged on their commitments and lenders still use old terminology to describe what they call the delinquent (borrower in arrears).
In some cases there are dangers of personal foreclosure i.e if the borrower is likely to receive any property or capital sum, which the creditor could request to reduce or settle the debt, this also includes bonuses or salary increases and it really makes common sense that if there is an ability to pay then the debt should be paid.
We nearly had the world banks collapse as a result of the more recent relaxing of lending criteria and the devaluation of their believed equity in the loan and property portfolios held by them brought home the dangers of personal foreclosure to the financial institutions. We will see more foreclosures over the coming years as the recent lax lending works its way out of the system.
In the right circumstances the dangers of personal foreclosure are overrated, but all avenues should be explored first but don’t let personal honor or pride prevent the borrower from making their final decision. The effect and worries over debt can be life threatening and cause severe depression and even suicide in extreme cases.
The steps to resolve debt problems should be how much income is available to maintain payments and how much equity is in the property or assets held (items of value could be sold to reduce the debt). Then if not sufficient, could a remortgage reduce monthly expenditure or pay of any short term borrowing by extending the term therefore reducing the amount of regular payment.