Healing time?

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A cure period is a designated time period included in contracts such as loans and mortgages, allowing the borrower to catch up on past due payments before the lender takes legal action. It benefits both parties by avoiding legal fees and the need to repossess collateral.

A cure period is a period of time that is typically included in various types of contracts, including loans and mortgages. The purpose of this designated time period is to allow the borrower the opportunity to catch up on past due payments in the event of a loan default. Sometimes called a repayment grace period, lenders often extend this opportunity for a limited period of time before moving forward with steps to repossess collateral or use legal means to pay off the outstanding balance on a loan.

The use of a cure period is sometimes called a fixed period, since its intended purpose is to provide a final opportunity for a defaulting debtor to make things right with the lender. During this period, the debtor is given a specified number of calendar days to do whatever is necessary to prevent the default from progressing. For example, if the borrower is three months behind on the mortgage payment, the cure period may provide a 30-day period to make up all missed payments, as well as make payments due during that period. If the debtor manages to recover the missed payments, the mortgage is considered current again and the default stops.

The same general approach is sometimes used in other loan situations. Assuming the loan agreement includes provisions for a cure period, a borrower who is behind on his auto loan payments may also have one last chance to catch up on payments before the lender takes action. Typically, this will require submitting all past due payments along with any interest or penalties that have accrued. As long as the full amount owed is in the hands of the lender by the end date of the healing period, the loan is back in force and the relationship can continue as before.

While the inclusion of a cure period is often considered beneficial to the debtor, the lender may also gain some advantage by extending this type of grace period. When a borrower who is behind is able to catch up on payments during this healing period, the lender does not have to dedicate additional resources to declare the loan delinquent. The lender can also avoid spending money and time on legal fees to pursue payment of the debt, and does not have to come at the expense of repossessing any collateral associated with the loan.

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