# Loan Modification

*Borrowing & Credit — Finicade finance glossary*

A loan modification permanently changes an existing loan rate, term or principal to make payments affordable and avoid a costly foreclosure.

A loan modification permanently changes the terms of an existing loan — rate, term, or principal — to make payments affordable, usually to avoid a foreclosure that would cost the lender more. It differs from refinancing, which replaces the loan entirely and requires you to qualify anew; modification is negotiated precisely because you can't. It typically marks your credit, but far less than the foreclosure or default it prevents.

**Also known as:** mortgage modification, restructuring a loan, workout

**Related terms:** [Forbearance](https://finicade.com/glossary/forbearance), [Refinancing](https://finicade.com/glossary/refinancing), [Delinquency](https://finicade.com/glossary/delinquency), [Mortgage](https://finicade.com/glossary/mortgage), [Debt Settlement](https://finicade.com/glossary/debt-settlement)

Source: https://finicade.com/glossary/loan-modification