Avoid Foreclosures - Debt Consolidation Vs Mortgage Modification

Debt consolidation and the mortgage modification program seem to be on the top of the list of major relief programs that are been sorted after by many homeowners struggling against foreclosures. Here is guide to compare the basic outline of both the services and chose the one which suits your financial needs best.  

Debt Consolidation  

This is a process wherein you can take one loan to pay off one or many others. The benefits that make this option desirable are lower interest rates, or getting a fixed interest rate or to have only one big loan to pay off rather than many small ones.  

This type of an exercise can also be of great help when trying to convert an unsecured loan into a secured one. When a loan is taken by pledging collateral such as property then the loan becomes secure. Now the lender has a guarantee in terms of your condo, which can be sold off to pay the loan in case you default. A secured lender will obviously be at a lower risk level than the one granting an unsecured loan and therefore will charge a lower rate of interest. 

Loan Modification  

Now if you as the debtor are unable to meet the payments of the loan due to some unfortunate financial happenstance then the mortgage loan stands a chance of foreclosure and you may lose your valuable asset. To avoid this foreclosure you can contact the lender who would consider your situation and grant you a modification in the existing mortgage agreement if satisfied. The mod would be such that it would make the otherwise colossal monthly payments more manageable for the time being.  

On comparison, we would conclude that mortgage modification beats the former by a considerable margin, especially in the present context of the subprime crisis when the incomes are on a decline. More and more debtors are opting for formulating a loan modification agreement rather than pledging their precious assets for another loan and facing the risk of losing them.