How to Negotiate a HELOC Collection

A home equity line of credit (HELOC) is financing secured by the equity in your home. For example, if the home's market value is $300,000 and you owe $250,000 on the home, you have $50,000 equity in the home. Since the financing is secured by your home, it's important to settle default situations right away. Otherwise, the lender has a right to foreclose on the home. Working with the lender to get caught up on payments and make future payments more affordable will relieve financial stresses.

Instructions

1

Offer a cash settlement. Once a loan moves to default status, the lender will usually accept a cash settlement. This means that you offer a lump sum payment, less than the loan's value, to settle the debt obligation.

2

Negotiate a catch-up plan. If you can't afford to settle the HELOC, ask the lender to create a catch-up plan. With a catch-up plan, you make a small additional payment each month. Over time, this will catch you up on missed payments. It will also move your account out of "default" status. This will preserve your credit score.

3

Apply for forbearance. Forbearance programs allow borrowers to stop making HELOC payments for an agreed upon period of time. These programs are usually reserved for people struggling with serious illness or financial difficulty. Apply with your lender.

4

Covert the HELOC to a home equity loan. A HELOC typically has an adjustable rate. The product may offer a low introductory interest rate; however, payments get more expensive over time. Lower monthly payments by requesting a home equity loan. This will lock in a fixed rate and payment for the life of the loan. Negotiate this conversion when arranging a catch-up plan with the lender.