What is a potential consequence for a borrower undergoing foreclosure?

When a borrower undergoes foreclosure, one potential consequence is indeed higher interest rates on future loans. This happens because foreclosure is viewed as a negative mark on a borrower’s credit report, indicating to lenders that the borrower is a higher risk. When a lender perceives a higher risk, they typically respond by increasing the interest rates on future loans as a safeguard against potential default.

The implication of a foreclosure can significantly impact a borrower's credit score and overall creditworthiness, leading lenders to adjust terms accordingly in future lending scenarios. Therefore, the higher interest rates are a direct result of the borrower's changed risk profile post-foreclosure. This financial strain can limit access to favorable loan terms and increase the cost of borrowing in the future.