This is a guest post submitted by Andrew Black of www.australianlendingcentre.com.au.
Are you having a hard time trying to make both ends meet? Your income may have dwindled due to the recent economic trouble. Thus, shouldering monthly repayment for a significant loan could be a really huge challenge.
You don’t have to fall into a default. You could avoid further trouble if you would immediately act to take an effective solution. Talking to your loan provider about your problem would make a difference. Here are five recommended actions you could take.
Seek modification of loan or mortgage.
The moment you feel that your loan or mortgage payment is no longer affordable for your current budget, immediately seek to modify it. Contact your loan provider and seek advice on how to lower your monthly payment. Through a loan/mortgage modification, your lender may refinance your debt, extend its term, or ideally lower your required monthly payment to make it more affordable. Your creditors will be more than willing to modify the loan than to have another loan default from a distressed borrower.
Enter a forbearance agreement.
Forbearance is an agreement between you and your lender. In the deal, the loan provider agrees not to repossess your loan collateral, impose penalties, or take litigating action while you struggle to get current on payments. It is a temporary deal that is only implemented to give consideration to borrowers with financial problems, which may have been caused by sudden occurrences like an abrupt job loss or a severe health condition. You may possibly halt monthly loan payments until the time you can financially be able to shoulder it again.
Opt for a short sale.
You can offer to sell a property and use all of the proceeds from that sale to fully settle your debt with a lender. This agreement can be tricky. Even if your property is sold at an amount that may fall lower than how much you owe, your creditor agrees to take the amount and clear you of any debt or financial obligation. Again, most loan providers find this as a better option than to shoulder greater costs of dealing with a borrower’s default, entering foreclosure, or taking legal action.
Opt for deed-in-lieu of foreclosure.
You may spare yourself from the embarrassment and hassle of foreclosure. Your loan provider would also prefer it if you would just opt for a deed-in-lieu of foreclosure. This way, you would voluntarily transfer the property’s deed to your lender. This is ideal if you are already in a default on a loan and you don’t have other options; if you have failed in your attempt to have a short-sale; and if you don’t have another mortgage in default.
Lease your property.
If you find your monthly loan repayment as unaffordable, you may rent out your home. This way, you could generate an amount that would be sufficient to meet your monthly financial obligation to the lender. In turn, you could just move (or rent) into a more affordable home without losing your property.
Andrew has been blogging for over 5 years specializing in budgeting and personal finance topics. Andrew is also a regular forum contributor and has help many people to deal with debt issues. When he is not writing, Andrew enjoys spending time with his family and friends.