How to Execute a Loan Modification

Any type of loan or credit account can be modified: personal loans, credit cards, mortgages, auto loans, student loans. Modifications usually happen when the borrower wants to change the terms of the original loan. She typically looks to save money by lowering the interest rate, principal or fees. This option is usually only available to borrowers in good standing, but some lenders will offer modification as a last resort for borrowers at risk of default.

Instructions

1

Review your credit report by ordering copies from each of the three major credit bureaus (Transunion, Equifax, and Experian) before considering loan modification. The best way to negotiate for better terms is to demonstrate you have been a responsible borrower. Correct errors, resolve late payments and address defaults or other blemishes on your report before you start the negotiation process.

2

Contact the owner of the loan you want to modify. Use the contact information on your bill or credit report. It's usually easier to modify loans that have been in good standing for a period of years.

3

Request an alteration to the loan terms, appropriate to the loan type. For example, many borrowers of student loans request deferments if they have trouble maintaining solid employment. Mortgage borrowers might request a lower interest rate or reduced principal. Credit card borrowers in good standing can request upgrades to better membership levels or reduced interest rates.

4

Ask the customer service representative to mail you a copy of the new credit agreement. Verbal agreements are difficult to prove. Keep the contract for your records.

5

Review your new monthly statement to verify that the loan has been modified according to your agreement.