Strategies for Creditors Negotiating a Loan Modification

 Posted on April 30, 2020 in Loan Modification

With the millions of people who have lost their jobs the past few months, creditors face the possibility of an increasing number of borrowers defaulting on their debts. With some clients, creditors will eventually need to decide whether to pursue collection on the debt or offer to modify the loan. Creditors who use debt collection may risk the debtor filing for bankruptcy and receiving little or no repayment if they are not a secured creditor. Negotiating a loan modification can be more beneficial for both sides but may not work with all clients. The creditor must balance receiving some return on the loan without surrendering too much money with the modification.

Should You Offer Loan Modification?

You should evaluate each client individually before deciding whether to approach them about loan modification or accept their offer to negotiate a loan modification:

• Is the client truly incapable of repaying the loan as it exists?
• What is the current financial circumstance that is preventing the client from repaying the loan?
• What is the likelihood that circumstances will change, either for the better or the worse?
• Is there a lower monthly payment that the client could afford?
• What is your client’s history of making payments on time?

When modifying a loan, there is always a risk that the client will still default on the debt despite the modifications. The risk may be lower if the client appears to be suffering a temporary setback and has never missed a payment in the past.

How Should You Approach the Negotiations?

It is up to you to decide how much you are willing to modify the loan agreement, whether it is deferring payments or lowering the amount owed. How you approach the client during the negotiations can determine whether you are able to reach an agreement:

• Research the client’s financial circumstances to better understand what they can afford.
• Express a desire to work with the client on reaching a compromise.
• Be clear about what you need from the negotiations.
• Present options for modifying the loan.
• Be willing to listen to reasonable offers.
• Provide what you believe is a reasonable offer in return.
• Maintain a calm and professional tone throughout the negotiations.

Contact an Illinois Debt Collection Attorney

When creating new loan agreements or modifying existing ones, it is important to have legal counsel who can examine the agreements. A Chicago creditor’s rights lawyer at Dimand Walinski Law Offices, P.C., can ensure that your loan agreements protect your financial interests in the event that you have difficulty collecting on the debt. Schedule a consultation by calling 312-704-0771.

Source:

https://www.nbcchicago.com/news/local/chicago-housing-pledge-to-aid-residents-with-rent-mortgage-during-coronavirus/2263846/