The Negative Long-Term Effects are Both Emotional and Financial
The financial fallout from a foreclosure is very real, but the emotional distress that you and your family will deal with after you go through foreclosure can be just as debilitating. Studies show that losing a home through foreclosure can be just as traumatic as divorce or death, the top two negative stressors that affect people today.
A home is so much more than an “asset.” Being able to buy a home is an indicator of success, an accomplishment to be proud of; owning a home is an achievement that commands respect. A home means not just physical safety and stability, but deep emotional security. Significant life events take place in a home; people are married, they have children, they raise them. Losing that home can be devastating.
Depression can and will affect every member of your family after a foreclosure. Parents feel like a failure, and the thought of starting from scratch again can seem overwhelming. Moving is always difficult. Children are particularly susceptible to emotional problems when they are uprooted, and the normal course of their lives is turned upside down.
The psychological impact of foreclosure is further exacerbated by the financial issues that will continue afterwards, sometimes for years. It’s well known that foreclosure will ruin your credit rating, but just what does that really mean? Many don’t realize how far-reaching the effects of a negative credit history can be. A foreclosure can create problems for your day-to-day living situation in many ways, including:
- After a foreclosure you and your family will need to move, and the obvious choice is a rental. But many people don’t realize that apartment complexes and managers may deny a renter based on a negative credit history, especially immediately after a foreclosure. It makes you look like a bad risk.
- If you are accepted into an apartment, your deposits may be higher; so of course it will be more difficult to put together the money to actually move to begin with.
- When starting over again as a renter, additional deposits – often high deposits – will be required to start up many services such as utilities, phone service, etc. Sometimes a foreclosure will even affect the rates you pay for insurance on your home and/or automobiles.
- It is likely that you may be denied credit of any kind for at least a year or two after the foreclosure. If you are given a credit card or an auto loan, the interest rates will be extremely high.
- If you are seeking employment, potential employers will look at your credit history, and a foreclosure may often make a difference in whether you are hired for a job or not. If you’ve lost your home because you lost your job and need to find another one, this can be particularly painful.
When talking about life after foreclosure, people generally focus only on the financial impact it will have on a person and/or a family. In some instances, it may seem that going through foreclosure will make life easier because you can just start over again, fresh. But it’s vitally important to take into consideration the emotional toll foreclosure will take as well, because that’s a pretty important reason to work toward keeping your credit history intact by avoiding foreclosure.
