The process of changing the terms and conditions of a loan agreement by the issuer of the loan. This action may be initiated by the borrower or the lender. Loan modifications are typically requested by the borrower in order to lower their monthly payment or interest rate. If the loan modification is accepted by the lender and the borrower, the new terms and conditions supersede the previous contract. The lender has the ability to accept or deny a request for a loan modification after evaluating the borrower's application and financial history. Loan modifications may reduce the interest rate, but extend the duration of loan; these types of modifications may end up costing the borrower more money in the long run.