finance

Most homeowners will qualify for a loan modification or workout plan. President Obama's office estimates that up to nine million homeowners could benefit from a loan modification or workout plan. Modifications are just as good for the mortgage lenders and banks as they are for homeowners. Lenders are able to turn bad defaulted loans into good performing loans.

A loan modification is a change or modification of any of the original terms found on your note. If you have an adjustable rate note you could get it modified to a fixed rate. If you have a fifteen year note you could modify it to a thirty year term cutting the payments by up to thirty percent or more. These are just a couple of common examples. The possibilities are endless as to what new terms can be negotiated with your lender.

How do I find out if I qualify for a loan modification? If you are struggling with your payments, have an adjustable rate mortgage or you will be struggling with payments within the next six months and you can afford to make reasonable ongoing reduced payments to your lender them you most likely qualify for a loan modification. The only way to be sure is to ask your lender in writing for a loan modification or loan workout plan.

Mortgage loans are not the only types of loans that can be modified. Credit card lenders have always modified terms in order to collect on an account. Car lenders also routinely modify their borrowers loans temporarily. Any loan can be modified.

A loan modification must make sense and benefit both the lender and the borrower. The main benefit to the borrower is a payment and or interest reduction so they can afford to keep the home and will not be forced to sell, short sell or foreclose. The lender benefits by being able to collect monthly payments from a borrower who was not previously paying or was at risk of not being able to pay.

You can do your own loan workout or hire a reputable company to represent you and process your request. The success ratio for homeowner workouts is about 30% and about 70% when using a professional.

The modification application package will include the same documents you would use to apply for a new loan. It will also include your story or hardship letter explaining why you cannot afford the present terms on your loan and what type of repayment plan you could afford.

The basic steps are about the same both for professionals and borrowers.

The first step is to contact your lender. It is best to do this in writing via certified mail. You should say why you cannot afford your payments and request a loan modification or loan workout.

If you are current on payments then send a letter to your lender's correspondence address

If you are in default then send it to the loss mitigation or collections department

If you are in bankruptcy then you need to send it to the bankruptcy department

Step two is to make sure you get a response letter from your lender acknowledging your request and send the information they request via certified mail. If you do not get a response then call and send letters until you do. If you are current you could wait till you default and then resend your request this will defiantly trigger a response.

Step three is to review the lenders proposed modification and make sure you can afford what is being proposed. If you cannot afford then do not accept. Contact the lender and continue to negotiate until you get a payment you can live with.

The final step is to sign in front of a notary all of the documents and return to the lender for recording.

You should not expect payments on a mortgage modification to be below the cost of the lenders money. So if you have an adjustable rate based on the six month LIBOR index look it up and determine what rate the index is at now. Then add 2.5% to 3.5% to that rate. This is what you should expect from your loan modification. For fixed rates you could use the Fannie Mae sixty day rate found on efanniemae.com or just use the LIBOR plus 2.5%. In conjunction with a lower rate a longer term can also be used to lower the payment if lowering the rate is not enough.

The money market is flooded with a variety of personal loans. Now which one suits you the best, depends upon your conditions and requirements. The most familiar one is the secured loan which the lenders have been offering for a couple of last decades. These are the personal loans which can be approached either in person or online by the borrowers.

Benefits of the secured loans

Secured loans entertain the borrowers with a series of benefits. These are:

1. You will have to pay very low interest rates. 

2. A loan amount of £5000 to as high as £75000 can be raised easily. 

3. Loan can be accessed for a long time period which generally ranges between 10 to 15 years. 

4. The repayment options for the secured loans are as per your ease. 

5. You can go for a bunch of personal expenses out of these loans.

Therefore, the secured loans have become the first choice among most of the borrowers in UK. Side by side, the lenders also feel safe to issue such loans as they are having any personal asset of the borrower with them as a collateral security. In case, the borrower commits any fraud, that asset can be sold off and the loan amount can be generated back. This makes the lenders feel free to sanction such loans for as long period as the borrower wants depending upon the value of the security. Even the credit worthiness of the borrower is also ignored by many of the lenders.

Furthermore, the borrowers can also go for a payment protection plan which is simply an insurance of the payments you make to the lenders as installments of loan and interest. The advantage comes to you when, unfortunately in future you fail to pay back your amount of secured loans due to any mis-happening. So, you are fully secured by these loans.

John Elson master in Business Administration. He has been worked over 10 years