Loan modification involves an amendment to the terms of an outstanding loan, typically involving a change in the interest, principal and/or term of the loan.  One or more of the following amendments would modify the terms of debt:

  • Postponement of interest payments (grace period), often without bearing interest;
  • Postponement of the principal repayment date;
  • Capitalization of interest, which is added to the principal;
  • Reduction in the accrued interest due;
  • Reduction of the interest rate for the remaining original life of the debt;
  • Reduction of the loan principal amount;
  • Substitution or addition of related-party debtor(s);
  • Provision of additional collateral or security by the debtor; and
  • Subordination of the debt.

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