The formula to calculate the loan modification ratio (R) is:
\[ R = \left(\frac{M}{O}\right) \times 100 \]
Where:
Let's say the modified loan amount (\( M \)) is $80,000 and the original loan amount (\( O \)) is $100,000. Using the formula:
\[ R = \left(\frac{80,000}{100,000}\right) \times 100 \]
We get:
\[ R = 0.8 \times 100 = 80 \]
So, the loan modification ratio (\( R \)) is 80%.
A loan modification ratio is a percentage that represents the change in the loan amount after a modification compared to the original loan amount. This ratio is useful for understanding how much the loan terms have been adjusted, which can be crucial for both lenders and borrowers in assessing the impact of the modification. Loan modifications can include changes to the interest rate, loan term, or principal balance, and are often used to make loans more affordable for borrowers facing financial difficulties.
