About two weeks ago I was speaking with a group of local business owners about current interest rates. As I am sure you know interest rates have taken a nose dive since the beginning of the pandemic due to the dramatic unemployment increase.
The most surprising part of our conversation was that about a third of these very smart business owners were unaware that you can do a modification on a personal or business loan. You do NOT have to go through all the hassle of refinancing.
I was shocked that they were unaware of this. I thought everyone knew. Hence, I want to share information with you today about refinancing versus loan modification.
The main difference between refinancing and loan modification is that a modification is exactly as it sounds - It modifies your current personal or business loan versus refinancing which completely replaces your current loan with a new one.
In speaking with my VP of Operations, Amanda, she also was unaware that she could modify her mortgage. She thought her only option to take advantage of the lower rates was to refinance. She didn’t want to refinance since many times when you refinance you have to pay for an updated appraisal and inspection on top of closing costs.
You do not incur these substantial fees when modifying your mortgage. You only pay minimal administration fees.
A loan modification can adjust the loan terms, interest rate, structure and more without all the extra expense.
I did a little homework on loan modifications and the only downside I could find was that it can show up on your credit report as a negative item. Having a small negative item showing up doesn’t compare to the savings you will see on your loan.
I very recently did a major business loan modification and it is saving me and my partner thousands of dollars!
Most loan modifications can be processed in only a few days with very little to no paperwork for borrowers in good standing.
If you are thinking about refinancing, do a little research and speak with your banker or loan officer to see if you qualify for a loan modification right away. Banks would much rather modify a loan than to risk losing your account to a different lender.
Learn what option is best for you and take action while the rates are low. The savings you see from a lower interest rate will add up and open up more opportunities for you to take your business to the next level.