What can be repossessed?

A land purchased on rent-to-own store on an installment plan (where you are technically renting the item until you fully pay for it), is likely to be subjected to repossession.

You may have a way out, in a way that you can return the collateral, but the lender is not bound to take it back. Especially, if the collateral’s worth is now significantly less than the debt, lender is more likely to refuse it.

In this best case scenario, where the lender accepts to take the collateral back, if the lender sells the collateral and the value of loan is not coped, you’ll stand responsible for rest of the difference.
How can you avoid repossession?

Now first things first, if your mortgage company contacts you concerning arrears or missed payments, do not ignore them.

It’s important to read your mortgage contract carefully, as lenders who specialise in high-risk loans will likely begin foreclosure proceedings after just two missed payments.

Most lenders will only repossess your home as a last resort. They usually prefer to sort out your payment problems in other ways. Your options will probably depend on:

• what type of mortgage you have?
• how much payment is due?
• the reasons for your arrears (for example, have you fallen ill or lost your job?)

If you are not going to be able to keep making payments to your mortgage, you may be able to avoid repossession by selling your home voluntarily (as discussed earlier) or applying for a mortgage rescue scheme.

Most borrowers don’t take this seriously or are afraid of contacting the bank and wait far too long before acting on a problem or even informing the bank that a problem exists.

When falling behind on payments, each bank has certain procedures.

All the banks have a Collection and Recoveries Department and a Customer Debt Managing Department, some also call these Voluntary Restructuring or Loan Modification or Moratorium.

Listed down are the procedures that will occur if a borrower falls in arrears:

Pre-Legal Section:

At first the borrower will be called where it will be tried to get a promise of paying the due amounts and some arrangements will be made in order to come up with a solution, unless these arrangements are broken three tines in a row, then the case will be forwarded to ICU (a department that banks have just like in a hospital).

The second will be done is giving 30 days time period to the borrower to rectify his promises.

If still they don’t see any progress from borrower’s side, it’s now headed to the Legal department.

In this case to avoid repossession, there are two things that the borrower can do:

One being where the borrower must ask for Breather Period aka ‘Holiday’ and get a period of time of about 3 to 6 months. The Breather period solely depends on how borrower’s profile looks.

Second being where borrower can ask for a reduction in payment, usually not less than half of the payment but it is somehow negotiable.

In a nutshell, the borrower has to be proactive and call the bank to get options for avoiding the repossession.