Loan settlement
A loan settlement is a settlement done by a third party. It negotiates with creditors to reduce the amount of debts. The loan settlement can be allowed by the bank after a certain period. To clarify, loan settlement is an agreement between lender and debtor, where the lender agrees to accept a lesser amount in return for the forgiveness of the remaining debt. Loan settlement helps debtor’s to reduce the burden of loans which they are paying. For loan settlement, you can consult a debt settlement company in New York.
- Loan modification:- If you are facing trouble with a monthly payment and want to reduce the monthly payment amount, then you can consult a debt settlement company in New York. They will negotiate with the lender. The lender will modify the loan and extend the term.
- Interest rate reduction:- You may modify your loan and pay lower interest. This can also reduce your monthly capital payment.
Refinance
Refinancing is the replacement of an existing mortgage loan with a new one. The terms and conditions of the old loan will be updated with the new agreement. Refinancing also lowers the interest rate. For example, you took a mortgage for 15 years and you are paying an interest rate of 7%. If you apply for a mortgage refinance in New York, you can pay the interest rate to 4% or lower.
- Extend your mortgage term:- If a loan payment is causing a burden on your monthly payment, then you can lower the amount which has to be paid monthly and extend the term.
- Shorten your term:- You can also shorten the mortgage refinancing term. It will increase your monthly payment amount.
- Lower interest:- Mortgage refinance in New York is a good option as it lowers the interest rate from the one you were paying. As the interest rate will be lower now, you can save more money.
Debt settlement VS Refinance
- Loan settlement and refinancing both are for reducing the interest rate on your existing loan.
- Settlement clears off the debt in one go. It can take several months for the procedure.
- Refinancing takes time. Converting an existing loan to a new loan takes time. It may take months or a year.
- Refinancing can extend or shorten the time period of the monthly payment.
- Loan settlement does not change the time period. It only clears off the debt.
- Refinancing allows you to change the terms, time period, and type of loan.
- Through loan settlement, you can only change your terms of the loan.
- In loan settlement, once the negotiation is done, you are debt-free. But, in refinancing you will not be debt-free until the debt is paid off.
- Loan settlement leaves an impact on your credit card score whereas refinancing leaves no such impact.
Conclusion
Debt settlement is different from refinancing. Loan settlement allows you to change the terms and conditions of the existing debt. It helps you to lower the interest rates by negotiating with the lender. Most lenders agree to loan modification when the debtor is on the verge of foreclosure. Whereas, refinancing is an agreement where you change your existing mortgage with a new loan. You can change your loan terms, lower the interest rate and even change the loan type. The company can extend or shorten the loan payment period. You can also take out some cash while refinancing. They both may sound similar but they are not. However, they both are used for lowering the burden of debts. Both are better with their policies.