Five Reasons to go for Loan Modification Instead of Filing for Bankruptcy

Those people who are unable to pay back their debts and want to stay in
their home they should go for loan modification. Loan modification is a
simple way that gives you a chance for the debtors to pay back their debt.
Actually loan modification can be very useful for debtors if the borrower is
truly having a short-term hardship. In the loan modification your debt can
be changed to a more affordable and reduce your monthly payment and
interest rate. In simple words, the purpose for loan modification is to
reduce debtor mortgage payments and make the payments affordable.
Here Brian Linnekens a bankruptcy lawyer shares five reasons why you
need to go for loan modification instead of filing for bankruptcy.
Reduces interest rate
One of the biggest benefits for loan modification is – a creditor will agree
to reduce the interest rate for debtor mortgage but if you have a
modification with a step rate feature, the initial modified interest rate is
temporary it means it is usually fixed for 5 years after completing 5 years
your interest rate begins to adjust automatically.
This process is called rate cap. One important thing to remember is if your loan
modification is about five years then your monthly payment and interest may be
changing soon. If you still have a concern about anything then you need to call your
mortgage company.
Protect your home
Loan modification is the best way for people to use who are not able to pay back
their debt and want to keep their homes. Actually, those people may be thinking of
filing a bankruptcy they believe that they might not get to keep their homes, and the
unfortunate truth is that the entire process will only allow them to stay a little bit
longer. However loan modification is a permanent solution for this problem. It will
make your current financial situation easier because with the loan modification you
can keep your residence by designing a lower monthly payment.
Reduce Principle
Principle reduction is a big benefit of loan modification. According to this the
creditor will reduce the amount of principal that the borrower owes, with no
expectation of a repayment. It is a very effective way to reduce payments than
lowering the interest rate on the mortgage, or extending the term.
Impact for the credit report and financial history
If you file bankruptcy you can get relief from all outstanding obligations but the mark
of bankruptcy is going to exist for seven to ten years. It is very difficult to get new
loans and apply for credit in future with a bankruptcy mark on your credit report.
However, loan modification builds a foundation for the consumer to rebuild their
financial picture once again.
Makes you Debt Free
Loan modification will help you become debt free from the mortgage or other loans
you owe. And the best thing is that this process is not recorded as a foreclosure or
bankruptcy and banks will not harass you for the difference between the selling
price of your home to pay off the mortgage in part and the total amount of the debt
in exchange of a clean slate.
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