Loan Modification includes changes to an existing loan agreement. Modifications are made by the lender if the borrower is not able to repay the loan. The aim of the process is to provide more affordable payments, so that the borrower doesn’t have to default on the loan.
Additional meaning of Loan Modification:
Loan modification usually involves a reduction in the interest rate, an extension of the term of the loan, a different type of loan or any combination of the three. Banks choose to offer loan modification programs because their costs are less than the cost of default.