Foreclosure : Causes And Effects

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Foreclosure: Causes and Effects People borrow money for many reasons, and the amount of every loan varies. In essence, the repayment of the loan is the primary obligation of the borrower. However, not all loans are paid in full. In some cases, the unpaid balance remains beyond the paying capacity of the borrower. This can cause problems for both the borrower and the lender. To avoid this predicament, there are situations where the borrower requires collateral from the lender in case the lender defaults on payment. In short, the collateral is meant to secure the borrower’s repayment of the loan. If the borrower is unable to make due and diligent payment — or if the borrower does not make repayment at all — the lender can ask for the foreclosure of the property issued as collateral for the loan. In sum, foreclosure refers to the process where the lender tries to recover the unpaid balance of a loan by forcing the sale of the collateral.
The chief cause of foreclosure is the failure of the borrower to repay the loan within the agreed schedule. The failure to pay may be partial or full depending on the circumstance. In any case, the lender may file a lawsuit for the foreclosure of the asset. This is called judicial foreclosure. There is also the non-judicial foreclosure where the lender can sell the collateral in order to recover the payment for the loan. Non-judicial foreclosure occurs if there is a power of sale clause in the contract between the lender and the borrower
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