Making a change to your loan agreements is called a loan modification. What this does is makes your repayments more affordable, and stops you from defaulting on your loan. The reason that banks offer loan modifications is because it works out cheaper for them to help you than to end up having to chase you for an eventual debt.
Why are loan modifications offered by the bank?
The following are reasons as to why you would be offered a loan modification by the bank.
- You have stopped making payments
- If your home could be up for foreclosure
- They would have to hire someone to collect on the debt you have with them
- You may declare yourself bankrupt and then they get nothing or very little in return
Your bank does not to have to resort to any of the above, if they offer you a modification on your loan. If the modification is agreed and set in place then your credit will not affected and there would be no financial cost for the bank.
The last thing the bank wants is to manage property, so rather than be left with lots of properties because homeowners can’t keep up with their repayments, the bank looks for an alternative and that just happens to be a loan modification.
So if you feel that you are possibly looking at being in this very same predicament then speak to your bank about the option of a loan modification. It is better to talk to them about it, than ignore it, in the hope that it goes away.
Avoid Foreclosure and get a loan modification with lower payments.
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