If you’re having a difficult time keeping up with your loan payments, the most sensible thing to do is to speak with your lender and request for modification of your repayment terms. This should be done immediately, to avoid complicating the problem. Do not wait until your lending company sends you a notice of foreclosure before you attempt to negotiate.

To avoid losing possession of your property, you should strive for loan modification. Nevertheless, some people may be hesitant to seek out this solution, thinking that they will not get a positive response from their lender. In this article, let’s discuss the most common false beliefs about loan modification and the truth behind them.

My credit rating is too low to qualify for modification. Yes, an excellent credit rating would work to your advantage when requesting for loan modification. Keep in mind that loan modification is not the same as reapplication. Even with a low credit score, it is still worth the effort to request your lender for easier repayment terms, especially if you have a good reason for doing so.

It’s better to declare bankruptcy than to seek loan modification. Defaulting from your loan payments and declaring bankruptcy can be your last result when facing foreclosure. Keep in mind that a record of bankruptcy is a very derogatory remark that will remain in your credit report for 7 years. Obviously, such a negative record can affect your opportunities in the future.

Lending companies do not offer loan modification. On the contrary, many lending companies will actually choose loan modification to help a borrower catch up with repayment rather than push through with the long and complicated process of bankruptcy. Foreclosing a home is an option, but putting the house on a sale does not guarantee that the proceeds of the sale will be able to pay the debts completely. Letting the borrower continue with the monthly loan payments, with the terms modified to ease the burden is actually an ideal solution for lenders.

You should only seek loan modification when facing foreclosure. There is no need to wait until you miss a due date or fall behind your loan payments before asking for a loan modification. If you know that you are at risk of defaulting from your loan, then you should inform your lender immediately about your situation and ask for help. If you have reasonable cause (loss of job, a decrease in your earnings, sickness, injury, divorce, etc.), then your lender will surely consider modifying your loan’s terms.

Loan Modification will damage your credit rating. Modifications, like loan refinancing should not dramatically affect your credit score compared to going through foreclosure or bankruptcy. In fact, by being able to submit your loan payments on time, you can improve your credit score just a few months after modification.

Once a foreclosure notice has been sent, there is no other solution. If your lending company has already sent you a notice of foreclosure, you can still try to negotiate for a loan modification. Lenders will usually prefer modification over foreclosure but you need to act quickly before the foreclosure process begins.