Which term refers to changing the terms of a loan?

• A. Refinancing
• B. Recasting
• C. Modification
• D. Adjustment

Answer: (B)

Modification is the term used when the lender officially alters the terms of an existing loan. This can include changing the interest rate, extending or shortening the repayment period, or adjusting the monthly payment, typically to help a borrower manage hardship or avoid default.

Refinancing replaces the old loan with a new one, usually with new terms and a new rate. Recasting re-amortizes the remaining balance to produce a new payment while the interest rate and original terms often stay the same. Adjustment isn’t a standard term for changing loan terms.