Avoiding Repossession

Avoiding Repossession

When you take out a secured loan, you are using an asset as collateral. For example, with a mortgage, your home is collateral. With a car loan, the car you are purchasing is used as collateral. Collateral is an extra bit of reassurance for the lender that you will pay your loan. This is because when a borrower defaults on a secured loan, the lender can legally repossess the property being used as collateral and even resell it to earn back the money lost on the unpaid loan.

There are many ways to avoid repossession. The first, of course, is not to take out too many personal loans. The more loans you have, the harder it will be to repay all of them and the more vulnerable you will be if you suddenly cannot work. Next, make sure that you read the terms of the loans you do have. What sorts of penalties are there on non-payment?

If you do get behind with paying your loans, you will need to act fast to avoid repossession. As soon as you know you will be late with a personal loan payment, contact your lender. Try to work out a repayment schedule. If your loans are simply too unaffordable, consider refinancing your loans or reselling your assets. Remember: if your property is repossessed, you will get no cash for it. You may as well save your credit score and get money for your property by selling it if it is no longer affordable.

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