Consumers are protected by laws against predatory lending practices which prevent lenders from providing them with financing that isn’t affordable. Among the opportunities in which an attorney could help these consumers is through a loan modification.
How Extending the Terms Works?
Essentially, an extension of the terms is a refinance where the lender modifies the terms of the loan such as the duration of the loan. This process allows the lender to restart the loan placing any overdue balances at the end of the loan. It could lead to more finances fees; however, by extending the terms, the borrower achieves a lower monthly payment. In most instances, this is the primary objective of a loan modification.
Decreasing the Interest Rates
Consumers who have become the victim of predatory lending practices may have a higher than average interest rate. An attorney reviews their credit rating and applicable interest rates, and if they qualify for a lower interest rate, the loan is modified to reflect this change. However, if the consumer received the correct interest rate, they could modify after they increase their credit score.
The interest rate adjustment reduces the total cost of the loan. The consumer could also achieve a lower monthly payment; however, they should assess the total value of the loan before signing a new contract.
What Is Debt Forgiveness?
Debt forgiveness is another opportunity available through loan modification. During this process, the lender reduces the total value of the principal and they are no longer responsible for the value subtracted. The lender produces a new loan contract to reflect these changes.
The lender may provide the consumer with a lowered payment per month. They also refrain from adding this value to the end of the loan. If the consumer accepts a reduction instead of debt forgiveness, the same value is added to the loan.
Consumers seek loan modification when they could face financial difficulties. These practices also help when the mortgage contract reflects predatory lending-based terms. The consumer could reduce the total value of the loan. The decrease is associated with the interest rate or the principal. Consumers who need help with these modifications should visit website for more information.
