Car loan modification: What it is and how it works Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial choices by providing you with interactive tools and financial calculators as well as publishing quality and impartial content. This allows you to conduct research and compare information at no cost to help you make sound financial decisions. Bankrate has partnerships with issuers, including but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The offers that appear on this website are provided by companies that compensate us. This compensation can affect the way and when products are listed on the site, such as, for example, the order in which they may be listed within the categories of listing and other categories, unless prohibited by law for our mortgage home equity, mortgage and other home lending products. However, this compensation will not influence the information we publish, or the reviews that appear on this website. We do not contain the universe of companies or financial offerings that could be available to you. KDP/Getty Images

4 min read Published 27 October 2022

Written by Allison Martin Written by Allison Martin’s work started over 10 years prior to that as a digital content strategist, and she’s since been published in numerous prestigious financial publications, including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Written by Rhys Subitch Edited by Auto loans Editor Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers gain confidence to manage their finances with clear, well-researched facts that break down complex topics into manageable bites. The Bankrate promises

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So, this compensation can affect the way, location and when the products are listed within categories, with the exception of those it is prohibited by law for our mortgage home equity, mortgage and other home loan products. Other elements, like our own proprietary website rules and whether a product is available within your region or within your personal credit score can also impact the way and place products are listed on this site. While we strive to provide the most diverse selection of products, Bankrate does not include specific information on every credit or financial product or service. Are you experiencing financial hardship and struggling to afford your car payment? If your lender allows modifications to car loans or loans, you might be able to receive needed relief. Modifying your loan means adjusting your monthly payment amount and due date, or even the interest rate. When you are behind in your payments, these choices can help you avoid damaging your credit score or the possibility of having your vehicle repossessed. What exactly is a loan modification is As the name implies the term “car loan modification is the process of changing the terms of your loan. The lender might be willing to lower your monthly payments, postpone payments for the short-term or change your payment due date so that it is best for you budget. There is also the option of getting an , which stretches the remaining balance of your loan out, allowing you to reduce your monthly payments. However, extending the time for repayment is also a sign that you pay more interest to the lender has more time to collect money from you, so you’ll pay more interest overall, unless you get back on track . Modification of loan terms isn’t readily accessible to all borrowers however. Though lenders tend to be wary of repossessing their vehicles those who have defaulted on their loans however, you’ll need to argue your case. One of the most important things to do is convince your lender that you will not be able pay back what you owe , unless they accept a modification to the terms of your loan. This may require providing financial documentation to prove that you’re experiencing hardship. How do you obtain a car loan changed You’ll have contact the lender who initiated your loan in person to talk about your situation and determine your possibility of a loan modification. Be mindful that lenders will generally review your past payment history before making a decision. It’s worthwhile to reference the fact that you’ve been a responsible customer and handled your loan responsibly. But if you’ve missed payment in the past and have a history of late payments, it may be a little more difficult for you to persuade the lender to alter your loan. Whatever the case follow these steps to begin the process. Call your lender right away Notify your lender that your auto loan payments aren’t affordable anymore and you are at risk of falling behind quickly. Be clear about the circumstances and the reasons you’re having difficulty making payments. The representative might offer some temporary solutions, however, you should ask for someone who can assist with an alternative that lasts. It’s helpful to mention that you’d like to keep your car but require assistance in achieving that objective. Be specific and use a friendly tone during the conversation. Put your request in writing If a loan modification is offered in most cases, you’ll be required to make your requests in writing. You’ll submit the request to the lender together with proof of your hardship, as well as any other information or documents the lender requires. You must provide the lender the most detailed information feasible about your circumstances. If you have lost your job or had a major or unexpected change in your life, share that information in your hardship letter. It’s an excellent idea to describe how the change will benefit you, like the ability to continue to make payment or to make payments in time. Your lender might also require financial documentation such as documents from your bills for the month and statement from your bank or receipts. Confirm receipt of your hardship request After you have turned all of documents in, the wait to hear back from the lender commences. In the meantime make sure you pay as much as you can, as repossessions can still take place as you wait for a decision on loan modification. Keep the person who is helping you with your modification up-to-date, explaining that you are still trying to make payments even amid financial challenges. How do you know if you should modify your car loan Think about modifying your car loan when your financial situation has abruptly changed because of the loss of your job, a temporary furlough or layoff, medical emergency or another situation that is beyond your control. It could also be a wise option if you’ve recently suffered a drop in wages. It is also possible to look into the possibility of a loan modification if your vehicle is worth far less than the debt you have. That means that you’re . selling your car to buy a more affordable vehicle would prove to be rather challenging and can cost you a lot. A car loan modification and. refinancing It’s simple to mix the auto loan modifications with refinancing, however the two aren’t quite identical. Both may lead to lower payments. However, unlike the auto loan modification, refinancing your loan is the process of swapping the current loan for a new one with different conditions. You’ll likely need good or excellent credit to qualify and go through the same application process similar to the one you went through when you applied for your current loan. A majority of lenders require insist that the mileage of your car does not exceed 100,000 miles, and you are unlikely to be eligible if your vehicle is more than 10 years old. When you apply for the loan is accepted, the lender will pay off your old loan and you’ll begin payments with the new lender. With a loan modifications, it’s your responsibility to work alongside your existing lender through the whole process. The bottom line It can be stressful when you cannot make the monthly payment on your car and aren’t in a situation to refinance however, you don’t have the option of going without a car. Think about contacting your lender to request a loan modification. Ask about reduced monthly payments or a lower interest rate, or even an alternative due date if that will allow you to pay punctually. If modification is not an option, there are other programs that will aid you in locating relief until you get your finances back on track. Learn more


Written by Allison Martin’s work started over 10 years ago as a digital content strategist and since then she’s been published in various top financial media such as The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate from late 2021. They are dedicated to helping their readers to control their finances with concise, well-researched, and clear information that breaks down complicated topics into digestible pieces.

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