Car loan modification: What it is and how it works Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial choices by offering you interactive financial calculators and tools, publishing original and objective content. This allows you to conduct your own research and compare information at no cost and help you make financial decisions with confidence. Bankrate has agreements with issuers, including but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The deals that are displayed on this website are provided by companies who pay us. This compensation can affect the way and where products appear on this site, including such things as the sequence in which they be listed within the categories of listing and other categories, unless prohibited by law. Our mortgage, home equity and other products that lend money to homeowners. But this compensation does affect the information we provide, or the reviews appear on this website. We do not cover the vast array of companies or financial offerings that could be open to you. KDP/Getty Images

4 min read. Published on October 27, 2022.

Written by Allison Martin Allison Martin Written by Allison Martin’s career began more than 10 years ago as a digital content strategist. She’s been published in numerous prestigious financial outlets, including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Written by Rhys Subitch The editor is Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are dedicated to helping readers gain confidence to control their finances through providing detailed, well-studied facts that break down complex topics into manageable bites. The Bankrate guarantee

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We are compensated for the placement of sponsored products andservices or by you clicking on specific links on our site. So, this compensation can impact how, where and when products are displayed within the listing categories, with the exception of those the law prohibits it for our mortgage home equity, mortgage and other products for home loans. Other factors, such as our own rules for our website and whether or not a product is available in your area or at your own personal credit score could also affect the manner in which products appear on this website. While we strive to provide the most diverse selection of products, Bankrate does not include details about every credit or financial product or service. Are you facing financial difficulties and are struggling to make car payment? If your lender provides modifications on car loans, you may be able to obtain needed relief. Loan modification involves adjusting your monthly installment amount as well as the due date and sometimes your interest rate. If you’re behind with your payments, these options could aid in avoiding the damage to your credit score and the possibility of having your vehicle repossessed. What is a car loan modification can you do? as the name suggests, a car loan modification involves changing the terms of the loan. The lender might agree to reduce the amount of your loan, delay your payments in the short term or change your payment due date to work more in line with your financial plan. There is also the option of getting an , which stretches the remaining balance that you loan out to lower the monthly payment. But extending the repayment period also means you pay more interest to the lender is able to take more money money from you, which means you’ll have to pay more interest overall, unless you get back on track and . The option of loan modification isn’t accessible to all borrowers though. Although lenders are generally not fond of repossessing vehicles of people who’ve fallen behind on their loans however, you’ll need to plead 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 agree to modify the terms of your loan. This could involve the submission of financial documents to show you are experiencing difficulties. How do you get a car loan modified ? You’ll need to reach out to the lender who originated this loan in person to talk about your circumstances and determine your possibility of an loan modification. Be mindful that lenders will generally review your past payment history before making a decision. It’s important to prove that you’ve been a good customer and handled your loan responsibly. But if you’ve missed payment in the past it might be a bit more challenging to convince the lender to modify the terms of your loan. Either way follow these steps to begin the process. Make contact with your lender immediately. Notify your lender that the auto loan payments are no longer affordable and you could be in debt quickly. Be clear about the circumstances and the reasons you’re struggling to make payments. The representative might offer temporary options for relief but you must ask to speak to someone who can assist you as you’re seeking a long-term solution. It’s a good idea to explain that you want to keep the vehicle but require assistance in achieving this goal. Be specific, and use a calm tone during the conversation. Make your request in writing If loan modification is available and you’ll usually be asked to put your request in writing. The request should be submitted to the lender, along with proof of your hardship and any other documents or information that the lender wants. You must provide the lender as much detail as feasible about your circumstances. If you lost your job or experienced some other important or sudden life event include that information in your hardship letter. It is an excellent idea to explain how the modification will help, such as permitting you to continue making payments or make payments on time. Your lender might also require financial documentation such as copies of your monthly bills , statement from your bank or receipts. Confirm receipt of your hardship request When you’ve turned all documents in, the waiting game to hear from the lender begins. While waiting make sure you pay as much as you can, as repossessions can continue to occur while you are awaiting a decision on loan modification. Keep the person who is helping you to modify your loan in the loop, explaining that you are still trying to pay your bills amid financial challenges. What are the signs that you should alter your car loan Think about modifying your car loan in the event that your financial situation has suddenly changed because of an unexpected job loss, temporary layoff or furlough, medical emergency or another event that is out of your control. It could also be a smart decision if you’ve recently suffered a drop in wages. It is also possible to look into a loan modification if your vehicle is worth more than what you owe. This means you’re . selling your car to buy an easier to afford vehicle could prove to be rather challenging and could end up costing you a significant amount. A car loan modification is different from. refinancing It’s easy to make a mistake when comparing the auto loan modifications with refinancing, but both aren’t the same. Both may lead to an easier payment. However, unlike auto loan modification refinancing your loan is the process of swapping your current loan to a new loan with different terms. You’ll likely need good or excellent credit to qualify for the loan, and you’ll need to go through the same application procedure like you did when you took out the current loan. A majority of lenders require insist that the mileage of your car does not exceed 100,000 miles. You probably won’t qualify if your vehicle is more than 10 years old. If you apply for the loan is accepted, the lender will repay the old loan and you’ll begin payment with your new lender. But with a car loan modification, you’ll work together with the current lender during the process. The bottom line is that it can be stressful if you are unable to afford your car payment and aren’t in a good situation to refinance but you don’t have the option of going without a car. You might want to contact your lender to request a loan modification. Request a reduction in monthly payments, a decreased cost of interest, and the option of a different due date, if it will help you make payments punctually. If you are not able to modify your payment alternative, you may want to consider other programs to aid you in locating relief until you can get your finances back in order. Learn more


Allison Martin’s writing 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 The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers to manage their finances by providing clear, well-researched facts that break down complex subjects into bite-sized pieces.

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