3 Reasons to Do a DIY Loan Modification

Do it yourself loan modification is not easy; it requires an understanding of loan contracts as well as a clear head during a trying situation. Most people will turn to the advice of financial professionals and attorneys in order to pursue a modification. However, there are some who would prefer to retain the power of the negotiation and save some money will benefit from a do it yourself approach.

#1 Save Money

Attorneys, accountants and financial advisers cost money. Most will assess a fee depending on the success of the modification. Those people pursuing modification do not typically have a lot of money to spare. In fact, whatever fee you are assessed can be ultimately subtracted from the savings you would gain through the modification. When you apply this step, you will see the savings are much lower when you elect an outside agent.

Taking the process on yourself will take up a lot of your time. However, for most people in this situation, money is more valuable than time. If you can dedicate enough time to research and understand your loan, you will find large savings by going through the process without any additional contract.

#2 Avoid Credit Penalties

One alternative to a do it yourself modification is to take an external loan. You can then use this loan to simply pay off, or prepay, the current loan in full. Most people will find it easier to contract with an outside lender to close the loan than to get an existing lender to agree to new terms. However, they will pay for this ease with a large credit penalty. The primary lender will report the loan as unsatisfactorily closed with the credit bureaus.

When you modify with your existing lender, you do not actually close the loan before it is scheduled to mature. The terms change, but this is handled independently of the principal sum that appears on your credit score. Instead of closing the loan in an unsatisfactory manner, you will eventually close the loan according to schedule, even if this is a different schedule than you previously agreed to. When you fulfill this obligation, your credit score will actually go up instead of down.

#3 Learn about Your Loan

There are some intangible benefits to taking on a modification yourself. The average borrower understands little about loan contracts, their credit score and how debt actually shapes their financial stability. Those individuals who go through the process of modification by using a third party will largely remain ignorant to the negotiations that occurred between the lenders.

On the other hand, those people who are able to move through the process themselves will become extremely familiar with the details of their loan contract, credit reports and other debt concerns. They will speak with lenders directly, gaining insight into how lenders assess a person's ability to pay. In the future, this information will serve a borrower well. You will be better able to negotiate new loans in the future, getting better deals on interest rates and managing your debt more effectively.