The Benefits of a DIY Loan Modification

Loan modification is the process of changing your loan contract to more favorable terms. Since you are changing a contract, you may want to consult with a financial adviser or lawyer. However, it is not entirely necessary to use a third party to help you negotiate. Some simple loan contracts can be renegotiated through a completely do it yourself process, resulting in a number of benefits.

Save on Fees

The main reason to approach loan modification without an agent or adviser is to avoid paying fees. Even a relatively simple loan modification can result in relatively large fees, which are typically charged as a percentage of the total loan amount renegotiated. You will have to put some time in to handle the whole process yourself, including time spent researching options. However, if your money is more valuable than your time, you will realize savings by doing most of the process yourself.

Retain the Power

Most borrowers will want the ultimate say in how their loan is sourced and signed. Working with an agent can leave many borrowers feeling powerless. At times, it is possible your agent or lawyer will advise you to take a step you do not feel is right given your personal preferences and current situation. This can lead to conflict, and you will not be entirely in control of the process. When you negotiate the loan yourself, you get the first and last word every step of the way.

Avoid Credit Problems

Lenders do not look on loan modification favorably. It usually means they will be losing potential profits on the loan. As such, you will see a knock in your credit score if the lender is not completely satisfied with the way you modify the loan. In particular, lenders will penalize you for paying off the loan early with another loan from another lender. In this case, you will totally close the loan with your primary lender. Instead of reporting the loan as satisfactorily closed, the lender will actually report you closed the loan in a method not permitted in the original loan terms. When you modify directly with the lender, the lender will not report this same problem to the credit bureaus, and you may avoid credit penalties altogether.

Learn About Your Loan

There is no better way to learn about loan sourcing, modification and contracting then to do it yourself. If you were previously uncertain exactly how lenders determined items like terms, interest rates and monthly payments, you will learn this entire process through renegotiating your loan. The lender will be directing all questions about your credit, income and market factors directly to you. Again, this means you will be spending time researching and preparing responses. In the end, though, you will have an intimate knowledge of every detail of your new contract since you helped write it. When the time comes to sign the new loan or amendment, you will know what you are signing before you even look at the paper. Ultimately, the benefits of this knowledge will be yours for a lifetime.