Should I Take Out a Personal Loan to Stop Foreclosure in Arizona?

Quite often when I meet with a homeowner facing foreclosure, they’re looking for options to stop foreclosure in Arizona.
One of the most important questions to address if you are trying to stop the foreclosure is “How far behind in payments are you?” Besides owing for so many missed months, if your notice of default has been posted and the bank is proceeding with a foreclosure, you will now also have foreclosure fees included.
Most banks will not wait much longer than 3 missed payments to start the foreclosure proceedings. They know, statistically speaking, that it is very difficult for most anyone to come up with the funds to pay back 1 missed payment, let alone 3 or more.

Can you Stop Foreclosure in Arizona?

How it works in Arizona when you are in foreclosure, is that you have up until the auction date to pay back any arrears of payments and fees. Meaning, you can “make good” on your loan by reinstating it by sending the missed payments, interest, fees, etc.; your loan would then be back on track. If the loan goes through the foreclosure process, known as Trustee’s Sale, there is no “redemption period” like there is in other states, where you have the possibility of getting your home back even after the foreclosure. In Arizona, once the home has sold through Trustee’s Sale, it’s gone. (Unless in the rare instance the Trustee rescinds the sale, but that’s not the norm). But to stop the foreclosure in Arizona, one option is to simply pay the what’s owed in missed payments and any accrued fees.
So let’s go back to the question I get asked a lot: “Should I take out a personal loan or tap into my retirement accounts to make up the missed payments?”
Here’s where it’s important to look at the overall picture. Is your house underwater? Meaning, do you owe more than it’s worth? If it’s underwater, how long do you think it would take to break even? Is the house in excellent condition? You may have to budget for repairs as well. If it’s a rental, do you cash flow? How much? And lastly, where are these funds coming from? If you are tapping into a high-interest credit card, how are you planning on paying that back? If you tap into your retirement account and still lose the house, how are you planning on making up for those lost funds?
You can see that it’s not as cut and dry as simply coming up with the money to catch up on the loans. Another important factor is, can you really afford this house? If the problem couldn’t be nipped in the bud 6 payments ago, how are you planning on paying for it here on out on the same level of income?
avoid foreclosure arizona stop foreclosure arizona
Example 1:
In one scenario I had a couple that had a nice home that was slightly underwater. The wife had been in a bad car accident the year before and had not been working until she could get well. In the meantime, the house payments had fallen behind so they needed to sell.
We had started the paperwork to sell the property after reviewing their options, and within a few days she called me to let me know she accepted a job proposal she hadn’t expected to get! They were then able to afford to pay up the missed payments within her first paycheck and get back on track, so we cancelled the sale. Even though the house was slightly underwater, they found it best to keep the property for the long term and raise their family there.
Example 2:
In another scenario, I had a couple who were 6+ payments behind, the home was in fair condition with lot of repairs needed, income levels had dropped and the house was heavily upside down. They were expecting a settlement from an accident that happened years ago and wanted to know if they should use that to pay up the loan. I asked them to really consider what putting the majority of a settlement they had waited two years for towards a home that was in dire need of repairs, in foreclosure and had no equity would do for their overall financial situation. It may also be 10+ years before or if they broke even on the property, whereas they could take that money, put a down payment on a rental in good condition and save up for a house in the future. However, being so emotionally attached to the house, they decided to keep it and stay. Would you have?
Example 3:
For a final example, I had a client who’s rental property went into foreclosure. He owed about 10k in missed payments, lost about $100/month on the rental and wondering if he should sell his work trailer to make up for the payments. I asked him if it would affect his income to sell the work trailer, which he said that it would. I then questioned what his long-term strategy would be for that to hang onto a rental property that had no equity, lost him at least $1,200/year and would further contribute to lost income if he kept it. He realized after saying it outloud that the property would really never pay him back at this rate, and moved forward with the sale. Is that what you would have done, too?
It’s always smart to look into options if you are falling behind on payments, but I stress being mindful of taking out any more debt that is high-interest and/or high risk and affects your financial future. Is it really worth it? That’s only something you can answer, but if you or someone you know is facing foreclosure, need to sell and want an outsiders perspective from a professional and friendly point of view, we’re here to help!
Tracy (G+) is a distressed property expert, Investor, Rehabber, and pre-foreclosure specialist.
She also is an avid blogger, vlogger, contributor to Real Estate Magazines, and hosts Real Estate Rescue, a show dedicated to the distressed property market.

Get Free Email Updates!

Join thousands of other visitors now for a monthly newsletter with new content, real estate updates & insider news only available to subscribers

I will never give away, trade or sell your email address. You can unsubscribe at any time.

  • Yes! I Want to Know My Options

  • -
  • Should be Empty:

Compassion & Clarity from your Team

“Hi Tracy...Thank you for keeping in touch and keeping us advised as steps progressed. .Reg and I are soooo very thankful for you and the Team’s handling of all the sheets and letters we received from our mortgage company. We are sorry we lost our beautiful home, but glad it was handled the next best way (for our credit) and that someone else now desires it..."...

selling your home FREE REPORT
10 Secrets to Selling Your
Home the Pros Don't Want You To Know!