What is Foreclosure ?

When a person applies for a loan he usually pledges some asset as collateral for the loan.With the understanding that the money will be paid back in regular installments over a period of time. However sometime's due to several reasons such as an unexpected medical or financial problems the borrower may not be able make the payments as agreed.In such a case a person may choose or be forced to foreclosure.

Foreclosure = Forward + Closure

Foreclosure simply means the process of bringing forward the closing date of the loan agreement.

The general process of foreclosure has 6 steps:

1. The borrower does not pay the EMI.
2. The bank sends a demand notice to the borrower.
3. The bank takes possession and publishes the notice.
4. The bank publishes an auction notice.
5. The auction takes place.
6. The bank receives the amount due to them and the remaining amount goes to the borrower.

The entire process from start to finish takes months and sometimes years.

Next: Advantages of Foreclosure.