When trying to decide whether to use a new loan to stop foreclosure or loan modification, there are certain factors to consider that can help make the decision for you.
Taking out a new, refinance loan will impact your credit much less severely than the modification of a loan.
While the later harms your credit just about as much as foreclosure, but taking out a refinance loan only affects it in a reasonable and respectable manner.
Of course, you need to have a measure of decent credit in order to qualify for a refinance or other new loan rather than opting for loan modification.
While people with poor credit are prime candidates (though not necessarily "shoe-ins"), since they are considered high default risks by lenders they are therefore less likely to get approved for a refinance than a modification.
If your credit is such that you can qualify for either a new loan to stop foreclosure or loan-modification then you must next look at the terms of the refinance loan you are eligible for.
In order to proceed with a refinancing, the borrower must be able to prove that his or her income (current or future) will support the terms of this new loan.
In other words, if you can't afford the monthly payments on your new loan any more than you did on your original, then you're just postponing the foreclosure.
Of course, a candidate for a modification of a loan must also prove that he or she can meet the new payment terms of the modified loan.
It's just that these terms are ordinarily more reasonable (read: affordable) than those of a refinance loan.