How To Use Debt Settlement With A Loan Modification

By Author: Nick Adama
Total Articles: 197
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As credit card companies continue to increase rates and gouge their customers, debt settlement or debt management is becoming more popular. Debt settlement is the procedure of eliminating a portion of the debt and establishing a repayment plan that will get you out of debt in just a matter of months or years. Some credit card debt could take nearly a lifetime to pay off, so seeing relief in just a few months or years is a huge relief for most people.

But debt settlement is generally only for unsecured accounts. Other debts, such as {second mortgages or first mortgages are not included. This is because these types of loans have collateral to back them up.When you do not pay, the bank will simply take away the collateral with a repossession, or the home, with a foreclosure. One option to eliminate these debts or to pay them back on a more affordable schedule is bankruptcy. The main problem with bankruptcy is the amount of time it remaindstays on your credit. In most cases, debt settlement combined with a loan modification would be considered more appropriate than bankruptcy.

A loan modification is comparable to debt ...
... settlement in that a portion of the mortgage debt may be eliminated and new repayment terms are structured to make the payment more affordable. This can be done by extending the term of the loan or lowering the interest rate. A loan modification is though of one of the best alternatives to foreclosure if you want to keep your home. It will make your property affordable again and has very little damange on your credit. In fact, it should begin to build your credit, assuming you have not done anything else to lower your score.

To qualify for a loan modification, you will need to demonstrate that you have experienced a difficulty and that a modification would make your mortgage payments affordable for the remaining life of the loan. Many lenders will want you to be behind on payments before approving a loan modification, but that is not required. Even if you are current, if you can show that the payment is not affordable, an effective negotiator should be able to get it approved.

A loan modification should be requested for at the same time as debt settlement. Ideally you want to demonstrate to all your creditors improving your payment terms. Asking all your creditors to improve a little, is easier than asking one of them to reduce their payment a lot.

In any scenario, your credit will be effected to some extent, but when you are no longer able to meet your payments, or if you have already missed payments, then you will not be approved for new credit anyway. Most people only use their credit once every 4 years, so this will give you plenty of time to improve your credit and become debt free. This is much better than a bankruptcy that can remain on your credit for 10 years.
To find out more about the foreclosure process, visit Nick's website, which provides information to homeowners trying to save their properties. Foreclosure refinancing, deed in lieu, mortgage modification, and bankruptcy assistance can be found, in addition to info on avoiding a foreclosure before the sheriff sale. You can read more about how to save your home while there is still time and find the site on the web here: http://www.foreclosurefish.net/