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What is meant by Loan Modification?

Submitted by on Wed, 04/06/2011 - 03:17
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What do you mean by loan modification? Does it have any relation with credit score?


When you're delinquent on your mortgage payments, you can apply for a loan modification with your lender. In this process, if you meet the required criteria, the lender will reduce the interest rate for the loan payments so that it becomes easier for you to pay off the mortgage. However, as your loan term will be reduced, the term period to pay off the loan will get increased. In some cases, the lender will even reduce the principal balance to a certain extent.

In most cases, the borrowers apply for a loan modification when are already in default. Thus, in such situations, the loan modification will affect the credit score and lower it to some extent.


Submitted by Anna Sweeting on Thu, 04/07/2011 - 03:08

Anna Sweeting

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