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.