Loan modification and its advantages

Loan modification is a process of change in the loan agreement. If you cannot repay your loan amount due to this failing economy, at that time, both the lender and you can

modify your existing agreement by lowering the rate of interest, reducing the principle balance, ‘fixing’ adjustable interest rates, increase in the loan term, etc. Banks prefer

loan modification programs because it becomes easier to work with you. So, whatever I mentioned above was my idea about loan modification.
Now, let’s discuss about the benefits or the advantages which we derive from loan modification programs:

• Stop foreclosure on your home:

Ones objective is to stop foreclosure of ones home during the beginning of the loan modification process. The lender would always prefer to let you stay in your house and

continue making payments. He will not like any foreclosure.
In mortgage companies, they negotiate.

• Decreasing the interest rate:

The lenders reduce the rate of interest so that it becomes affordable as well as easier for you to pay back the loan.

• Lowering the monthly payments:

When you cannot repay your loan amount, then there is another option i.e. reducing the monthly payments. This reduction in the monthly payments can also be done even if

the interest rate is at a fair market value.

• Lowering the principal:

If a person stays in area where is badly affected by the economic downturn, then that individual’s house is going to worth less than for what amount they owe

it. This scenario is said to be the upside down on a loan. A loan modification helps to reduce the principal amount, which also helps to reduce the payments. In this way it

helps to make the house more affordable again.

• Credit score maintenance:

Loan modification helps to save your credit score. If there is any foreclosure in your credit history, then you credit score falls drastically.

I would also suggest one of the most important things that are, if you are struggling to repay your loan, and if you think you can’t make the payment, then you should

immediately apply for the loan modification program. If you are late in availing this program, then maybe nothing can be done.