Auto loan modifications: A benefit to both creditor and borrower

Posted in Car Loan Modification by admin

Auto loan modifications helps the borrower to pay the remaining loan balance by modifying the terms agreed upon when he or she applied for the auto loan. By doing this, the borrower gets to keep his car for a few more months, unless he or she fails to pay again. Getting an auto loan modification can be a total lifesaver especially to those people who have financial problems.

Getting an auto loan modification not only enables you to hold on to the car and keep it from being repossessed, but it also keeps your credit rating from getting a negative remark from your lending company. As you can see, auto loan modifications benefit the borrower greatly.

But do you know that creditors also benefit when you apply for an auto loan modification?

Yes, creditors do benefit whenever someone applies for an auto loan modification. If you apply for a loan modification, you get to keep the car. However, if the borrower fails to apply for one, the lending company can take away your car, leaving the borrower empty-handed. What you don’t know is that when they repossess your car, they experience some losses as well. Now, you may ask, how can they experience loss(es) when they already have the car back?

They may have repossessed the car, but in order for them to replace the money lost (i.e. the money loaned to you), they will need to sell the car at the market. Seeing that the car has already been used by a few months or so, its value will be lower than that of a brand new car. In effect, the price will be lowered by a thousand dollars, or even more so depending on the quality and state of the car.

What’s more, is that by the time they have taken away your car, newer car models have been released in the market. No one would want to buy something that’s old, especially when you have access to more advanced, newer car models. They will then have to lower the price even more, greatly reducing their supposed-to-be profit.

Even worse, is that they won’t be able to sell it anymore. And that is a huge loss for the lending company.

That is why most lending companies and banks offer these auto loan modifications. Getting an auto loan modification will not only benefit the borrower, but also the creditor as well.