Debt Consolidation and
Loan Modification
There are two terms that anyone with debt or a house should be familiar
with and they are debt consolidation and loan modification. In today’s
economy, these are the only two words that you have to know, even more
so than bankruptcy and settlement because these are the words that will
help you save your home and your sanity.
Debt consolidation is simply what it sounds like. You take all of your
debts and you lump them into one payment. This gives you a lower monthly
amount that you are responsible for, a lower interest rate on the money
you have borrowed (especially if you are coming from credit cards), and
the sanity that comes from only taking care of one bill each month
instead of several.
Loan modification is the process of modifying your existing loan so that
the amount borrowed is either less or at least your monthly payment is.
Say that you borrowed money on a house that was worth $350,000 when you
bought it, but now it is worth $200,000 and you cannot make the
payments. The mortgage company can do several things: they can change an
adjustable rate to a fixed rate, they can extend the life of the loan,
they can reduce the loan to what the house is worth now, or they can
reduce the interest rate.
Sometimes they do a combination. If you have a really good lender, they
might do a loan modification and a debt consolidation all into one – so
that you have one loan that you are responsible for at a payment you can
afford. The fact of the matter is that there are many things out there
that are available if you need them. To roll over and play dead or
declare bankruptcy are not really your options anymore – not if you have
the desire to pay back your bills and the means.
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