Loan Modification
Adjust Existing Loan Terms for Better Management
A loan modification changes the terms of your existing loan to make payments more manageable. This option can apply to various types of loans including mortgages, auto loans, personal loans, and sometimes student loans. Unlike refinancing, a modification adjusts your current loan rather than creating a new one, making it accessible to those who might not qualify for refinancing. Modifications can include interest rate reductions, extended payment terms, or payment deferrals. While this can provide significant relief, approval depends on demonstrating financial hardship and meeting lender-specific criteria.
Pros
- Keep financed assets
- Lower monthly payments
- No refinancing costs
- May reduce interest rate
- Possible principal reduction
- Stop collection actions
- Available for multiple loan types
Cons
- May extend loan term
- Could increase total interest paid
- Credit score impact possible
- Complex application process
- Not guaranteed approval
- May require trial period
- Limited to existing lender
Qualifications
Must demonstrate legitimate financial difficulty through job loss, income reduction, medical issues, or other significant life events.
Requirements vary by lender - some require current payments, others may require missed payments to qualify.
Must prove sufficient, stable income to afford modified payments while demonstrating need for relief.
Loan must typically be in good standing or recently delinquent, not in collections or charge-off status.
The Process
- 1Document Financial Hardship
- 2Review Current Loan Terms
- 3Collect Required Documentation
- 4Submit Application to Lender
- 5Complete Trial Period (if required)
- 6Accept Modified Terms
Timeline
1-3 Months
