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Monday February 19th 2018

Good The reason why Loan Modification is Preferable to Bankruptcy

Instead of filing for bankruptcy, many householders are applying to lenders for loan modification so one can continue paying their mortgage. Some options are: interest rate reduction, principal balance amount reduction, and monthly payment reduction.

True enough, bankruptcy filing is one option for a borrower who can now not make his monthly mortgage payment. However, bankruptcy doesn’t eliminate the chance of foreclosure. When possible, loan modification is a preferable alternative to bankruptcy.

Here are some good reasons for picking a loan modification over filing for bankruptcy:

Once you begin bankruptcy proceedings, there is nothing it is easy to do to forestall a foreclosure against your own home. Filing only stops the lender’s queries for a limited period, whereas loan modification lets you pay back your mortgage over the years, meaning that your house may someday be yours for good.

Once you file for bankruptcy, it affects your credit score profoundly — so much, if truth be told, that you would be able to never be eligible again for a mortgage loan. Even though you do qualify, the terms could be quite high. So here again, loan modification is preferable, in that a renegotiated loan agreement permits you to keep paying down your monthly mortgage while maintaining your credit rating.

Bankruptcy never improves a credit score and remains in your record for lots of years. Then again, regular payments on a loan modification show that you just are creditworthy, leading to the next credit score.

A well thought out loan modification may also improve your credit score when you get your lender to report the renegotiated agreement to the credit agencies.

In the overall analysis, loan modification is often preferable to filing for bankruptcy. The squaring of debts preserves your credit rating, unlike bankruptcy, that might return to haunt you later in life.

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