The Right to Cure Default is a consumer protection that provides borrowers with a valuable opportunity to resolve missed payments or other loan defaults before their lender takes aggressive collection actions like foreclosure or repossession.
When you take out a loan—for a home, car, or business—you agree to pay on time as outlined in your loan contract. Missing a payment triggers a default, but many states have laws that require lenders to give borrowers a formal chance to “cure” or fix the default.
How the Right to Cure Process Works
- Default Occurs: You miss one or more loan payments.
- Notice of Default: The lender must send a formal notice, often called a “Notice of Intent to Accelerate” or a “Cure Notice,” informing you of the missed payment and what you owe.
- Cure Period: This notice specifies a limited timeframe—commonly 20 to 30 days—during which you can pay the past-due amounts plus any late fees allowed.
- Curing the Default: If you pay the required sum within this window, you reinstate the loan and avoid further penalties.
If you fail to cure the default by the deadline, the lender can proceed with harsher remedies such as demanding the entire loan balance immediately or starting foreclosure proceedings.
Example: Mortgage Payment Default and Cure
Suppose you miss a $1,800 mortgage payment due on June 1. On June 20, your lender sends a cure notice requiring you to pay the missed amount plus a $90 late fee within 30 days. By paying the $1,890 before the deadline, you reinstate your mortgage loan and can continue making regular payments.
Important Elements of a Cure Notice
- Reason for Default: Clear explanation of why you’re in default.
- Amount to Cure: Total sum you must pay to reinstate the loan.
- Deadline: Exact date by which payment must be received.
- Consequences: What happens if you fail to cure, including possible foreclosure.
Variations by State and Loan Type
The Right to Cure can differ depending on your state’s laws and the type of loan—mortgages often have more robust protections compared to auto loans. Always review your loan agreement and consult your state’s consumer protection laws if you face loan delinquency. For mortgage issues, the Consumer Financial Protection Bureau offers helpful guidance on your rights and options: https://www.consumerfinance.gov/ask-cfpb/im-behind-on-my-mortgage-payments-what-are-my-rights-en-2035/
Frequently Asked Questions
Does curing a default remove the late payment from my credit report?
No, curing a default prevents foreclosure or repossession but does not erase late payment records, which may stay on your credit report for up to seven years.
Can the right to cure be used multiple times?
This depends on your loan’s terms and state law; some agreements limit how often you can cure defaults.
What if I miss the cure deadline by one day?
Deadlines are typically strict. Missing the deadline—even by a day—allows the lender to initiate further collection actions.
The Right to Cure Default offers a critical chance to avoid serious financial consequences by addressing missed payments promptly. Understanding this right can help you manage loan problems more effectively.
For related topics, see our articles on Loan Default and Mortgage Guaranty Insurance.