Loan modification is the process which involves making a permanent change in the terms and conditions of the loan agreement. The loan modification process is generally initiated by the borrower. The borrower requests a loan modification on account of his/her inability to repay the loan amount. If the lender accepts the request then new terms supersede the previous terms. The new terms generally contain lower interest rates and an extended loan duration. It all depends on the lender whether to allow the loan modification or deny it.
Why Should You Opt for A Loan Modification?
Modified loans can help you in many ways, especially if you are not able to repay the amount currently.
- Foreclosure sale can be avoided by opting for the loan modification option. If the sale is already scheduled, it can be postponed till your application for loan modification is reviewed.
- After the modification, you have to make much lower payments than the previous amount. You will have a payment amount which is according to your current financial situation.
- Foreclosure sale will do more damage to your credit score than the loan modification, so considering the latter one is much better.
Points to Remember While Opting for A Loan Modification
- If you are facing financial hardship and unable to repay the installments, you should never stop communicating with your loan lender. Do not ignore any letters or calls from the lender because it’s the lender who might accept your loan modification request.
- Always remember that after the loan modification, your payment amount will be reduced but the duration of the loan will be increased. So you will have to make the payments for a longer duration than before.
- There are many loan modification firms available. You can avail the services of one of these loan modification firms.
- Be careful about the loan modification scams. Sometimes, unscrupulous people try to take advantage of your stressful condition for their own benefits. They charge too much by guaranteeing that they will save your house from the foreclosure sale. Don’t get trapped in those scams.
Loan modification requires a lot of paperwork and you will pay the repayments for many years, so only choose it if you have no other option available. You should always contact your lender if you have any problems regarding the loan repayment. Communicating with the lender may save your house from the foreclosure sale and you may get the extension for your loan payment.
If your default in your mortgage payment, you are at risk of foreclosure like. Now, most people experiences financial challenges due to one reason or another. If you experience challenges paying off the mortgage, then you are eligible for the Bank of America home loan principal reduction program.
This is the program that has been designed to help you in reducing the home loan. Through the program you will be allowed to reduce your outstanding home mortgage loan balance. This means that the bank will regard apart of your principal balance to be interest free.
Note that this program is open to homeowners who have not defaulted on the payments for the last five years. Yes, this means that you need to meet the different requirements of the bank for you to be able to qualify for the modification process.
The bank once it establishes you are eligible they will provide you with different solutions that you can are choosing from. When it comes to the interest rates, the bank can lower the rates to about 2% of the principal loan. You can also get an extension on the repayment period to about 40 years.
To be eligible for the loan, you need to be in a place of hardship. That you when you are making the application. You will need to provide a letter of hardship. In addition to that, you will have to provide documents like utility bills, pay slips and the Insurance policies. These are the documents shall support your request. You need to ensure that the letter is specific to the need for you to get a positive answer.
You need to be careful of the lending institution that you choose. Not all the leading institutions will offer you a transparent loan modification. If you are not cautious, you will end up paying more than you bargained for. You should therefore ensure that you read the fine print of the agreement before you agree to any of the loan modification.
Defaulting on your loan payment can affect your financial records. You therefore need to ensure that you have accessed the principal reduction program to reduce the risks involved.
Loan modifications are a common fact for people facing financial woes. They have been an issue on news debates and are no longer a secretly hidden fact. Often, having to go through the loan modification process on your own leaves you desolate and helpless. Banks too don’t have the right kind of help and cooperation on this front. Seeking professional help for loan modifications seems to be the perfect solution. However, seeking to hire professional help can sometimes lead to a lot of anxiety. To cover this up, certain questions should be answered before you decide on your company.
How long has the company been into loan modifications?
It is always believed to be a good move to have a company with a decent track record to handle your loan modifications. A new company might get you scammed up unnecessarily. If you still want to go ahead with a brand new company, you need to perform a stringent evaluation and then take the right leap.
What is the success rate of the company for handling loan modifications?
Most of the loan modification firms boast to have a rate of 90% success. While this is an essential answer to all your worries, you should get concerned if your company doesn’t answer this question. Having a dicey answer for success rate should make you rethink about the company at once. Again fair evaluation of the success rate criteria should also be done while going ahead with the company. The loan modification company should be able to give a fair and realistic idea on its success rate.
What is the criterion to decide for the acceptance or denial of loan modifications?
It is extremely important that the loan modification company gives you an exact and detailed criterion of their loan modification cases. Failure to do so should ensure that you are dealing with a scam. A real and genuine loan modification company will consider all you assets, liabilities, income and any other supporting documents before making a claim for loan modification. They should also be very honest about whether they can help every person who approaches them or not.
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