Most of the time, paying off a loan is easy. All you have to do is make the monthly payments on time, and if you have a stable job and have made sure the monthly payment can fit into your budget, you’ll be fine.
However, life can sometimes throw curve balls at us. You might have to pay medical bills that can total tens of thousands of dollars, you might be in an accident where you can’t work for months, or you might lose your job entirely. If any of these things happen, you may not be able to make your loan payments each month, and if you can’t make your payments you’ll default on your loan.
However, you don’t have to sit back and meekly accept that a financial institution is going to take away your home or your car. You do have options, and one option that might allow you to avoid defaulting on your loan is a loan modification.
When you modify your loan, you work with your lender to modify some of the terms of your loan. There are several ways the terms of your loan can be modified, but all of them should lead to the same outcome—lowering your monthly payment to the point you can afford it.
While lowering your monthly bill through a loan modification sounds great, not everyone who wants a loan modification will get one. If you want to get a loan modification, you’ll have to either be delinquent on your loan or know that defaulting on your loan is imminent.
In addition, you’ll also have to give your lender a good reason why you’re delinquent on your loan. These reasons can include losing your job, going on disability, having a serious illness or suffering the loss of a spouse.
Typically, you’ll begin the process to modify your loan by talking with a lending advisor and letting them know that you’re having difficulty making your loan payments. You can then give your lender an amount that you can pay and work with them to see if your proposed monthly payment is feasible.
You should be aware that getting a loan modification may negatively affect your credit score. However, it will not affect it nearly as much as having your home foreclosed on, your car repossessed and your account being over 90 days overdue.
Lenders can modify a loan in several ways:
You should also know that these loan modifications may not be permanent. Lenders might only modify your loan until you can start making the original payment, especially if your financial hardship is only temporary.
If you’ve experienced a life event that has left you in financial hardship, loan modifications are a good way to keep you head above water. They can make your monthly payments more affordable, and most lenders would rather work with you to modify your loans rather than go through the hassle of foreclosing on your house or repossessing your property.
If you need help getting through uncertain financial times, contact First Alliance Credit Union today. Our lending advisors will be happy to help you modify your loans, refinance your loans or even help you take out a personal loan to give you some financial security until you can back on your feet.