What’s the difference between loan modification and debt settlement?

Debt settlement typically involves working with a professional debt settlement company to negotiate with the creditors to whom you owe debts. Your creditor may, for example, accept a one-time payment of 20 – 75% of your total debt and forgive the remainder of your debt. Loan modification, however, simply changes the terms of your loan to make payments more affordable. It does not reduce the amount of money that you owe to the creditor.

Other Loan Modification FAQs

Q: What is a loan modification, and how will it help me with my mortgage?
A: A loan modification occurs when a homeowner enters into an agreement with his or her mortgage loan servicer to change the terms of the mortgage. The goal … More
Q: How do I know if I am eligible for a loan modification under the “Making Home Affordable" Plan?
A: You may be eligible if: • You are the owner occupant of a one to four unit home, • The loan on your property is owned or securitized by Fannie Mae or … More
Q: What supporting documentation do I need to provide to get a loan modification?
A: There may be certain information required by your lender that varies depending on the particular loan modification program for which you are applying. However, … More
Q: How long does it take to get a loan modification?
A: The length of time that it takes to get a loan modification depends greatly on how long it takes your mortgage holder to process your loan modification, as … More
Q: Do I need to be behind on my mortgage payments to be eligible for a loan modification under the Home Affordable Modification?
A: No, you do not need to be behind on your mortgage to qualify for loan modification under the Home Affordable Modification Program. Responsible borrowers who are … More
Q: What do I need to give to my loan servicer if I am requesting a loan modification?
A: You are likely to need the following documents for your loan modification request: · Recent paystubs or … More
Q: What are the basic eligibility requirements for a loan modification under the Homeowner Affordability and Stability Plan?
A: You must meet some minimum eligibility requirements in order to qualify for a loan modification under the plan: · … More
Q: Will I be ineligible for a loan modification under the Homeowner Affordability and Stability Plan if I am current in my mortgage payments?
A: No. You may still be eligible for a loan modification under the Homeowner Affordability and Stability Plan if you are current in your mortgage payments, but you are … More
Q: Will I be eligible for a loan modification under the Homeowner Affordability and Stability Plan if I am behind in my mortgage payments, but my house is not yet in foreclosure?
A: As long as you are otherwise eligible under the basic requirements discussed above, you have missed two or more mortgage payments, and your loan servicer is … More
Q: Should I have an attorney help me with a loan modification - or do it myself?
A: You may contact your loan servicer directly about applying for a loan modification. You can also receive no-cost housing counseling about the options that might … More