What are Loan Modifications?
Loan modifications are charges to your loan agreement. Your payments will become more affordable and you will not have to default ion your loan. The banks offer loan modifications, as it is easier for them to work with you rather than chase you.
If you stop making your payments, then the bank has a few options in front of them. The bank can try and repossess your property like your home, they can try and collect with a bank levy or through a wage garnishment, they can hire somebody to come and collect or they can watch you declare bankruptcy and receive little or even nothing.
Your bank doesn’t like these options. Your credit will suffer and the bank will have to bare a financial cost.
There is another option though and that is the banks offering loan modifications. Loan modification usually costs less and is usually more profitable for the banks.
In order to get a loan modification you will just need to ask. You can call your lender and inform them about your financial situation. You will need to explain everything to them honestly and if they see things the same way that you do then they may just offer a loan modification.
Banks are able to change your loan terms so that they are more affordable. The changes that they make can be permanent or temporary.
As you now have lower monthly payments, you may end up paying more in interest in the years to come, but it might be worth it if loan modification keeps you afloat for now.
You will need to make sure though what it will cost and that it is your best option.
When you ask for a loan modification the bank will want proof that you are unable to make the payments. You will need your monthly income and expenses, which are broken down into categories.
You will need to be prepared to spend a while in order to request your loan modification as you will need to present your case, get your documents and send them to the bank.
Once you have made your request you will need to wait weeks before the bank does anything. During this waiting time you will need to do anything that your bank tells you to.