A loan modification can definitely save you from a foreclosure. But if you want your ultimate contract to be favourable, you will have to use a few effective techniques while negotiating with your lender. Here are a few of those:
Writing a Hardship Letter
The first thing you need to do, before applying for a loan modification, is to write a hardship letter that will explain clearly, why you are not able to afford your monthly payments. Such a letter will work provided you have been consistent in making your payments in the past.
One thing you need to keep in mind while drafting a hardship letter is to be truthful and genuine. Make sure you have enough evidence to prove each and every point you have mentioned in your letter. This will help you obtain the trust of your lender.
Lenders usually consider only a few kinds of financial hardships that include:
- Loss of employment due to a layoff or a reduction in force
- Decrease in income
- Loss in business
- Separation or divorce
- Increase of expense due to a newborn or an adopted child
- Death, disability or job loss of a family member who may have been helping in making payments
- Surge in interest rate on a variable rate mortgage
- Increase in medical expenses due to injury or illness
- Increase in debt accumulation over time
Keep the letter as short as possible and highlight all the important points.There are three things you need to remember:
- you have to meet the eligibility requirements of the lender
- you have to prove that you are worthy of loan modification
- You have to convince your lender that you are committed to a long-term solution offered by the loan modification.
Comparing with loans available in the market
If you can prove that your loan is not any more competitive in the loan market, you may be able to qualify for a loan modification. For this you may have to do some research and compare your loan with the others that are available in the market. See if the interest rate has fallen significantly. If it has you can convince your lender that it is possible for you to get a better loan outside. If your lender wants to retain you as a borrower, he will try and make your loan much more competitive.
Offering to settle a part of your debt
Although difficult, this technique is a sure shot way of obtaining a loan modification. In this you will have to make an immediate payment that will repay a major part of your current loan. So you need to have the cash ready or you will have to go for a new loan. However, before you go for a new loan, you need to make sure the new deal will help you save money in the long run.
Seeking Third-Party Assistance
Not at all times would you be able to convince your lender to approve your loan modification. During such times, loan modification counselors can help. Being professionals, they are well-versed in the art of negotiation and will suggest you the right way to approach your lender. Some may even negotiate on your behalf and make sure you get a favorable contract.
You can find a Loan modification counselor in any part of the USA. In fact some may even contact borrowers like you directly by purchasing your details via loan modification leads. Make sure the counsellor has good record before you take his help in negotiating loan modification.
Using Legal Protection
When nothing works, it is better to use protection that is offered to you by the court. To make sure you get this, you will have to prove that you are in no way able to continue making your monthly payments regularly. Also, you need to be eligible for the Chapter 13 reorganisation. If you can manage to make the judge consider your hardship letter, you can get your debt restructured easily.
While it is not really impossible to get your loan modified, it is not easy either. The lender is under no obligation to approve your loan modification application. It is up to you to convince your lender to understand your situation and modify your loan. If not, you can always refinance your loan by going with a new lender who gets in touch with you via loan modification leads.