However, this interest doesn’t include any personal belongings located in the home. This type of loan agreement gives the mortgage lender what’s called a “security interest” in the house.Ī security interest represents the lender’s right to repossess the house if the homeowner defaults on their mortgage loan. Just as car loans are secured by the purchased car, mortgage loans are secured by the purchased house. Secured Loans Give Lenders A Security Interest If you stop making payments on your credit card, you can face negative consequences, but the credit card company can’t “take back” what you purchased with your credit card like an auto lender can repossess a vehicle purchased with an auto loan. When you apply for a credit card, the bank will look at your credit score and income to approve your application. For example, credit card debt is unsecured debt. Unsecured debt, on the other hand, is debt that is not backed by anything of value. If you can’t make the payments, the lender can repossess the car and sell it to pay off whatever debt was left on the loan. For example, when you take out a car loan, you have to agree to secure the loan with the car. This approach applies to all kinds of secured debt. Lenders have the right to take the asset back if the borrower can’t make the required loan payments. When it comes to secured loans, the asset is almost always the property that was bought using the money provided by the loan. In finance, something of value is called an asset. What Is A Secured Loan?Ī secured loan is a loan that’s backed by something of value. Lenders are legally permitted to start the foreclosure process because when borrowers take out mortgage loans, they have to agree to have their loan secured by the house they’re buying. Foreclosure is a legal process that allows the mortgage lender to reclaim the home that the homeowner has stopped making payments on.Īlthough mortgage lenders don’t like to do it, foreclosures happen because lenders need to recover whatever they can from a defaulted mortgage loan. Why Foreclosure Happensįoreclosure happens when a homeowner can’t make their monthly payments on their mortgage and the lender decides to take the home back. Beyond that, what you can take and what’s considered a fixture depends on your state’s foreclosure law.īefore we cover some of the common items you can and can’t take, it’s helpful to understand why foreclosure happens in the first place. The general rule is that you can take all of your personal belongings from the home, but you can’t take any fixtures. Using Bankruptcy To Protect Your Home And Property From ForeclosureĪre you wondering what you can take from your home if it is being foreclosed upon? During the process of foreclosure, you do have legal rights to certain items, but it’s important to know what you can’t legally take when you leave your residence.
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