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What Is a Cure Period?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 15 September 2016
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A cure period is a time frame that is normally included in various types of contracts, including loans and mortgages. The purpose of this designated time frame is to allow the debtor an opportunity to catch up past due payments in the event that a default has occurred on the loan. Sometimes referred to as a repayment grace period, lenders will often extend this opportunity for a limited period of time before moving forward with taking steps to recover collateral or use legal means to settle the outstanding balance on a loan.

The use of a cure period is sometimes called a fix period, since the intended purpose is to provide one final opportunity for a debtor who is in default to make things right with the lender. During this period, the debtor is provided with specific number of calendar days to do whatever is necessary in order to prevent the default from progressing. For example, if the debtor is three months behind on the mortgage payment, the cure period may provide a 30-day period to catch up all payments that are in arrears, as well as make any payments that come due during that period. If the debtor is successful in catching up the back payments, then mortgage is once again considered current and the default is brought to a halt.

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The same general approach is sometimes used in other lending situations. Assuming that the loan contract include provisions for a cure period, a debtor who is behind on car loan payments may also be granted a last opportunity to catch up the payments before the lender takes action. Typically, this will require tendering all the past due payments along with any interest or penalties that have accumulated. As long as the total amount due is in the hands of the lender by the final date of the cure period, the loan is once again current and the relationship can continue as before.

While the inclusion of a cure period is often viewed as being beneficial for the debtor, the lender also can gain some advantage from extending this type of grace period. When a debtor who is in arrears is able to catch up on payments during this cure period, the lender does not have to devote additional resources to declare the loan in default. The lender is also able to avoid spending money and time on legal fees to pursue payment of the debt, and does not have to go to the expense of seizing any collateral associated with the loan.

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amypollick
Post 5

@anon340525: You need a lawyer. I know they're expensive, but you need someone who can deal with these people on their terms. If you have proof of the payment and all, you should be able to take some kind of legal action against them, but this is for an attorney to deal with. Filing the police report was a good thought. Get all your paperwork together and call an attorney. Good luck.

anon340525
Post 4

I came to this website to find out what a cure period is pertaining to my truck loan financed through United Auto. They would not tell me what it meant. Now I know why. To anyone out there whom has maybe had a vehicle repossessed, please keep reading. I need help!

Here's my story, I bought a truck from Cactus Auto in Tucson, AZ. I live in Phoenix, AZ. I bought it there because that is where my boss bought his truck, so he recommended them and brought me there. I put two thousand dollars as a down payment, was approved for financing and drove away that day in a 2003 Chevrolet Silverado Extended cab. The contract sat on the

salesperson's desk for a month, so when they sent my contract in for financing, they kicked it back to them and said the date was too old. They contacted me, and I had to drive to Tucson and sign a new contract with a current date. They then told me that United Auto would only finance me if I let them install a GPS system in the truck. So I let them.

The salesmen told me at that time they would not GPS lock my starter until my payment was 30 days past due. So my first payment was due on May 28 and I was transitioning from my old job to a new job and I was two weeks late on my truck payment and they locked my starter. I had my truck towed to a friend's house and contacted United Auto. They said sometimes the GPS systems malfunction, and they would send a tech out to reset it the next day. The next day, they repossessed my truck. Come to find out, my loan account was paid off in full on the 19th, ten days previously by Cactus Auto. The place I bought my truck from planned the entire scenario. They stole my truck from me right in front of my face. Now I know there is some part of this that is illegal, that they did wrong, I just don't know exactly what. What does a person do when someone steals their livelihood away from them?

So when I called the Phoenix Police to file a theft report is when I found out Cactus Auto repossessed my truck because they paid my loan off behind my back. So help, anyone, I need help with suggestions or comments. My name is Terry and I am a single mother of two, and I have no way to get to work or school, and I want my truck back.

indigomoth
Post 3

@bythewell - I've gone into a cure period before and it wasn't for anything nearly as big as a house. Basically, the way I see it is as a cushion in case something goes wrong and the person can't make the payment right away.

Few people are canny enough to make sure they are paying before the money is due, most pay right on the dot. So if anything goes wrong, say a strike, or the bank messes up, or whatever, you suddenly find yourself in arrears through no fault of your own. The cure period is so that they don't do anything drastic while you sort yourself out.

bythewell
Post 2

@Iluviaporos - Actually, I would argue that they don't have enough incentive to keep the person in the debt, as long as it's something like a car or a house. If they default, it means the bank gets to basically keep all the money that was already paid AND they get to keep the house. Why wouldn't they want someone to default?

It is good that they give people extra time sometimes, but I know they don't always do it. One thing that was being said that people should try if they are in this situation is to ask the company for the original documents. Often debts get sold on to several companies in as many years and all the documentation gets lost.

If they can't find the documents right away that gives you extra time to find somewhere else to live.

lluviaporos
Post 1

I guess in the end the people who put out the loan in the first place have more to gain if they keep the person paying than if they default. So it's in their best interest to give them every chance to get back on track to pay their debt.

It kind of makes me sad though as I know how desperate you can feel when you don't have enough money and sometimes 30 days just isn't going to be enough to hold off the debtors.

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