There is an indirect relation between Loan Modification and Credit Score. People who qualify for a loan modification are those who do not have enough money to pay their existing auto loans. With more number of individuals having a hard time keeping up with their bills, it is not surprising that so many finance companies, banks and automobile dealerships are concerned with the ability of their consumers to make their payments. However, there is some confusion in the relationship between credit score and loan modification.

“It is a common perception among people that going for an auto loan modification has a negative impact on the credit score card. Loan modification service is provided for car owners who are struggling to pay their payments on time and have a fear of having their vehicle repossessed. It is true that if your vehicle is repossessed, there is a negative impact on your credit score which can last up to 7 years.

However, loan modification is a service which is to assist vehicle owners to save their car from repossession. In no way they can harm your credit score. It helps in modifying your loan amount, interest rate and term extension.  A loan modification service provider is a mediator between you and your bank/ auto dealer to come to a friendly decision with lowered payments for the vehicle owner.

It is obvious that banks, auto dealers, lenders and other lending financial institutions will have the fear of getting their money back from the vehicle owners. Surprisingly, banks try to avoid repossession as there are chances of bad debts because they have to resell the vehicle to someone else. They do not want to take the pain of searching a worthy buyer and hence agree to modification terms helping the owners keep their car.

Hence, loan modification only helps avoiding repossession thus protecting you from the ill-effects of repossession on credit score card.

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