If you can stop a foreclosure by consolidating your debt, reducing your monthly payments to other creditors, and then having enough money to pay your mortgage lender, you should definitely consider that route. Not only will you improve your credit by getting all past-due loans up-to-date; you can save your home. The key problem is finding a lender who will do that for you. But think twice about consolidating your debt, because you are converting unsecured debt (credit cards) to secured debt (an equity line) and putting your home ownership at risk of foreclosure.

Predatory lenders charge high interest rates to borrowers and knowingly encourage borrowers to le about their income, expenses, and cash available for down payments so they can qualify for a loan. In most cases they also charge fees for unnecessary products and services.

You could end up with a loan that has a balloon payment (for example, the full amount due in five years), an interest-only-payment loan (so you end up paying none of the principal due and sometimes not even all of the interest due, so your loan amount continues to increase), and steep pre-payment penalties (to make it expensive to pay off the loan when you find out how bad the deal is).

It’s likely that you’re dealing with a predatory lender if you are encouraged to lie on your application, or if you are asked to sign blank contracts or loan documents, or documents that include information that is not true. Another key sign is that you find the costs for the loan or other loan terms at closing are different form the terms you agreed to prior to closing.

You may be able to work out a short pay or short refinance, which means that you, or someone representing you, negotiates with your lender to settle the loan for less than is due rather than foreclosing on the property. For example, suppose you owe $150,000 on the mortgage plus another $20,000 in past-due payments, interest, and legal fees.

You may be able to negotiate a settlement of the loan at $120,000 and then arrange for a refinance at $125,000 to cover the cost of paying off the original lender and also cover closing costs for the new loan.

A short pay or short refinance not only helps you avoid foreclosure; it also eliminates a portion of your debt. If you can’t get your lender to agree to the full reduction in debt, you may be able to borrow enough money from family or friends to help make up the difference in paying off the original lender. Do be careful, though, to avoid a predatory lender for the loan refinance.

You may be able to modify the original terms of your loan by working out a deal with your lender. This can include reducing your interest rate, reducing the amount of loan principal you pay with each payment, or extending the life of loan to reduce monthly payments. Many times these modifications are temporary solutions to help you recover form a financial emergency, such as the loss of a job or a sever medical emergency.

You may need to hire an attorney or a person who is a professional foreclosure negotiator to work out a modification with your lender. If you can’t work out a modification on your own, don’t hesitate to seek legal advice to save your home.

A repayment plan is a common way for you to work with your lender to avoid foreclosure, especially if the reason for your late payments was a temporary setback, such as a job or medical emergency. In most cases you will need to prove to your lender that you can now afford to make the payments in order to work out a payment plan.

Usually the lender will ask for income documentation. You will then need to pay some portion of the past-due payments, interest charges, and any costs or legal fees that may have been added on during the period of time you did not pay your loan.

You can then work out a repayment plan to pay a portion of the amount past due every month in addition to your regular payments until you have paid off the amount past due. These are very common foreclosure workouts, and you can usually work with the lender’s loss mitigation department o arrange such a repayment plan.

You do have the option to just give up the property and negotiate a deed-in-lieu of foreclosure to avoid the costs and problems associated with foreclosure. If you do decide to take this route, be sure you have considered all other options first, such as a sale of the property, a modification of your mortgage, a refinance, or a repayment plan.

You also must be sure before you sign the deed-in-lieu of foreclosure that you will not to have any deficiency in the amount still owed the bank. If you will still have a deficiency owed, the bank can still try to collect the additional funds. Be sure to work with an attorney if you are considering giving up the property to protect your financial future and avoid bankruptcy.