You have borrowed some money for a Kansas City home loan, but have found that you are unable to make scheduled payments. So you put off the payments until you discover that you’re 90 days past due and the loan has become non-performing. What does it mean for you and how can you avoid it?

Non-Performing Loans Can Hurt Your Credit

Non-performing loans are considered to be in default and it can hurt your credit score and put you at risk of foreclosure. It can also harm your chances of getting another loan in the future. The reason being, lenders want to make sure that you’ll be able to pay back the loans they lend you, so they’ll be extra cautious before lending to you if you have a history of non-performing loans.

Non-Performing Loans Are a Risk to Lenders

Lenders lend to you with the promise that they will get that money back. If your loan becomes non-performing, that means lost income for them and they can try to get their money back in one of four ways:

A lender’s policy on title insurance also helps a lender make sure that their interests in the property remains protected. If you begin to make payments on the loan again after it has become non-performing, its status changes to reperforming—even if you haven’t repaid your missed payments.

Avoiding Non-Performing Loans

One of the best ways to avoid a non-performing loan is to budget carefully before you buy a home and know how much you can afford. Of course life is unpredictable, so if you find that you’re having trouble repaying your loan, contact your lender and they will work with you to find a solution.

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The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.