What are my options if I can’t make a loan payment when due and my house is the collateral?

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What are my options if I can’t make a loan payment when due and my house is the collateral?

When my parents passed away both of my brothers agreed that the house should be put in my name since I was a single mom with a low paying job. My parents took out a personal line of credit with the house as collateral. I have been paying $150 monthly on this loan however the loan comes due at the end of this month. There is still a balance due of $18,500 and with my credit I am unable to get a loan. What are my options?

Asked on May 4, 2011 under Real Estate Law, Ohio

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

Your only options are to seek to refinance the loan, extending the time to pay; similarly, seek deferment of the final payment or work out a payment plan; look to sell the house; look to either rent out the house (while you live elsewhere) or sublet part of it, if by doing so you can make enough that you can strike a deal with the bank to pay the loan off still over time, but quickly; or to see if you can get a private loan from your family to pay off the line of credit.. The problem from your perspective with the first two options is that they are voluntary on the part of the bank--banks and other lenders are not obligated to refinance, work out a payment plan, etc. Instead, they can insist on getting paid when the terms of the loan say they should be paid.

The last option depends on whether you family will and can loan you money. And the other two options have their own problems. Again, at the end of the day, a bank or lender can insist on payment according to the loan's terms; you have to work within that framework.


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