You may take out loans to purchase various items throughout your lifetime, such as a car, a house, or to pay for your child’s college tuition. A loan modification involves modifying the terms of an existing loan, typically to make it more affordable for you as a borrower who might be in danger of defaulting, sometimes due to a scheduled rate increase or a job loss. For instance, you might want to pursue this route to avoid foreclosure on your house. It is important to note that a loan modification is not the same as refinancing a mortgage. In certain situations, you may also be allowed to file for bankruptcy. By combining these efforts, or by simply electing one of these options, you may be able to keep your home by lowering mortgage payments, avoiding default, and obtaining a way out of debilitating debt. A skilled lawyer can help ensure you take the correct legal steps to secure a promising financial future.
The Terms of the Loan
Typically, any type of loan comes with terms that outline how and when it should be paid by the borrower. Here are a few examples of the terms that can be amended through a loan modification:
- Adjusting the interest rate to a fixed percentage
- Changing the principal amount borrowed
- Modifying the duration of the loan
- Altering the monthly payment
- Temporarily suspending loan payments
- Adding the past due balance on the back end of the loan
Qualifications for a Loan Modification
A modification changes the terms of a current loan. It does not require the same level of credit rating that may be needed for refinancing, but you must show that you have enough income to make the altered payments, even if they are lowered. You may qualify for an Illinois loan modification on your mortgage if:
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