Loan modification, as the name suggests, is a modification of the terms of an existing loan. A modification can include a change to the interest rate, the length, or a principal deferral. The types of modifications that are available differ depending on the lender. Some lenders will only offer certain types of modifications, while others will offer any combinations.

Loan modifications are becoming rather common. This is because; the economy is posing many hardships for the Americans. Most people are looking for ways to reduce their debt without defaulting on their loans. Instead of choosing a refinancing, most people are opting for modifications. The reason for this is, refinancing means that you have to start all over with a new loan, while a modification simply changes things on the existing loan.

The ultimate goal of a loan modification is to keep the borrower from defaulting on the loan. A loan modification provides the borrower with a lower payment that they can afford. It allows the lender to maintain the balance of the original loan, which would be lost if the borrower chose to refinance instead.