Way To Extend The Loan Term?

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Bankruptcy is a common term in California, given that many homeowners fall behind on their mortgage payments. The debt problem keeps escalating as people experience challenges like unemployment, divorce, and unexpected medical bills, among others. If you are falling behind on your loan payments and looking for a way out, the Los Angeles Bankruptcy Attorney can guide you through bankruptcy and the loan term extension.

Loan Modification Options


It's common to experience financial challenges that might make it hard to meet your monthly loan installments. If you are struggling to pay your mortgage or other loans, you have several options to consider:

* Loan refinancing
* Loan term extension
* Filing for bankruptcy

Los Angeles Bankruptcy Attorney It's wise to consult an experienced bankruptcy attorney when seeking a solution for your debts. An attorney will help you determine the best way to deal with the debts to ensure that you reach a permanent solution to your debt issues. You can choose one of the listed options, and you can also combine several options to save your home or property from foreclosure. With the guidance of an attorney, you can lower the monthly loan installments, avoid loan defaults, and work your way out of debt. You should consider loan modification if you can no longer afford to make the monthly installments. Loan modification entails altering your loan terms through interest reduction or extending the loan term to make the installments affordable.

The Objectives of Loan Modification


Bankruptcy Lawyer The goal of a loan modification is to make the loan affordable for the borrower. Loan modification also prevents the lender from losing money. After modification, a borrower can meet the lower installments, which helps minimize the default rate. A lender has the mandate to alter the loan terms to make the loan more affordable for the borrower. Loan modification mainly entails:

* Altering the loan type typically from an adjustable interest rate loan to a fixed interest rate loan
* Changing the loan's interest rate by setting a lower rate
* Extension of the loan term. For instance, if the original loan was payable in 15 years, the lender can extend the loan to 25 years to lower its installments.
* Deferring some of the principal amounts
* Exempting or forgiving the borrower from paying some of the principal amounts.
* Adding the loan arrears to the back end of the loan

Some conventional lenders and financial institutions have in place loan modification programs. Borrowers can also take advantage of government programs to secure favorable loan modification terms. Seeking a loan modification is crucial because it can help you avoid foreclosure, often a costly process.

When to Seek an Extension of Loan Term


As long as you have suffered a significant hardship or income loss, you can request a loan modification from your lender. By extending your loan term, you will receive a better deal and pay lower monthly installments. When you start falling behind on your loan payments, your lender will start sending late notices and late payment penalty threats. If you miss three to four monthly installments, you might receive a notice of default from the lender or even a foreclosure notice in the case of a mortgage loan. You should not wait until you start receiving lenders' notices for you to contact a bankruptcy attorney. You should contact an attorney immediately you realize that you can't pay your loans on time. Upon contacting an attorney, you can discuss loan modification options and chart the best way forward. You don't have to wait until you default all your loans to request a loan modification. Before you even become delinquent on the payments, you can request a loan modification. Why should you seek the assistance of an attorney while seeking a loan modification? If you attempt to go it alone, most lenders will refer you to their loss mitigation departments. The large volume of phone calls from people seeking loan modification often overwhelms these departments. You will just be one of the many people seeking modification of their loan. With so many people calling the loss mitigation department for assistance, you might be lost in the shuffles. The loan modification process is much easier with the help of an experienced bankruptcy attorney. An attorney understands all the strategies used to help numerous people modify their loan terms. If you seek to extend the term of your mortgage loan, for instance, an attorney will help you avoid the hassle of competing with other borrowers in need of similar assistance. An attorney works for you and has your best interests at heart. An attorney will help you acquire a loan modification that works best for you.

Extension of Loan Term and Refinancing


Is an extension of the loan term the same as refinancing? No, loan refinancing is distinct from an extension of the loan term. Refinancing entails replacing the existing loan with an entirely new loan. You can seek a loan refinancing to reduce the applicable interest rates to change other unfavorable loan terms. For instance, if your current loan has an unfavorable adjustable interest rate, you can refinance it to change the interest rate. You can choose to refinance your loan with the current lender, and you can also choose an alternative lender. If you aren't creditworthy, you can't qualify for loan refinancing. It's also impossible to refinance your loan if the outstanding loan amount is more than your property's current value. Therefore, for refinancing, the value of your property should not have dropped beyond a certain point. Unlike refinancing, extending your loan term doesn't entail taking a new loan to replace the existing loan. You don't need to attain a certain level of creditworthiness to qualify for a loan term extension. However, to qualify for a loan extension, it should be evident that you have enough money to meet the new loan installments after extending the loan term. It's worth noting that extending the loan term could lead to higher interest rates. However, when modifying the loan terms, most lenders cooperate and give borrowers favorable deals to make the loan more affordable and prevent defaults.

Loan Term Extension During Bankruptcy


You should seek a loan modification early enough instead of waiting until you are on the verge of filing for bankruptcy. However, all isn't lost if you have already filed for bankruptcy. After filing for bankruptcy, you will enjoy an automatic stay, and you will no longer face harassment from creditors. You will be free from foreclosure and all other actions aimed at debt collection. You can either choose to file for Chapter 7 or Chapter 13 bankruptcy, depending on your attorney's guidance. After filing for bankruptcy, most aspects of your finances will be under the bankruptcy court's control. Extending your loan term under bankruptcy doesn't work the same way as extending the loan term through loan modification. Whether or not the bankruptcy court approves your loan term extension will depend on whether you file for Chapter 7 or Chapter 13 bankruptcy. If you seek a loan modification under Chapter 7 bankruptcy, the lender may request court approval. Court approval is mandatory while filing for Chapter 13 bankruptcy, irrespective of whether you seek an extension of your loan term or not. If you decide to modify your loan term after filing for bankruptcy, your bankruptcy attorney must file a motion and seek the bankruptcy court's approval for a loan modification.

Modifying Your Loan Under Chapter 13 Bankruptcy


You will have a chance to propose a loan repayment plan if you decide to file for bankruptcy under Chapter 13. Under Chapter 13 bankruptcy, you will make payments to a trustee, and the trustee distributes the money to your creditors who have filed valid claims. Your loan repayment plan under Chapter 13 must include certain obligations like child support, alimony payments, and past-due taxes. The repayment plan may also include secured loans like car loans and mortgages.