Housing Counselor Certification (HUD) Practice Exam

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Which aspect of a loan can a client modify when seeking a loan modification due to financial hardship?

Interest Rate
Loan Term
Principal Amount
Payment Schedule

The correct answer is: Loan Term

When a client is seeking a loan modification due to financial hardship, one effective aspect they can modify is the loan term. Adjusting the loan term can provide relief by extending the repayment period, which may lower the monthly payments and make them more manageable for the borrower. This could be particularly beneficial for someone struggling financially, as a longer term generally results in decreased monthly obligations. While it's also possible for clients to request modifications to other aspects, such as the interest rate or payment schedule, these adjustments often depend on the lender's policies and the specific circumstances of the borrower's financial situation. Modifying the principal amount is less common, as it involves reducing the total amount owed, which may not be feasible for the lender. Therefore, changing the loan term serves as a strategic approach for clients to alleviate their financial burden while working towards maintaining their housing stability.