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 smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content. This allows users to conduct research and compare information for free – so that you can make financial decisions with confidence. Bankrate has agreements with issuers such as, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn money The products that appear on this website are provided by companies who pay us. This compensation may impact how and when products are listed on the site, such as for instance, the sequence in which they appear within the listing categories and other categories, unless prohibited by law. Our mortgage home equity, mortgage and other products for home loans. This compensation, however, does affect the information we provide, or the reviews you read on this site. We do not contain the universe of companies or financial offerings that could be accessible to you. KDP/Getty Images

4 min read Published October 27, 2022

Written by Allison Martin Allison Martin Written by Allison Martin’s work began over 10 years ago as a digital content strategist, and she’s since been featured in a variety of top financial media outlets, such as The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Written by Rhys Subitch Editor: Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are dedicated to helping readers gain the confidence to manage their finances through providing concise, well-researched and precise facts that break down complicated topics into bite-sized pieces. The Bankrate guarantee

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If you have questions about money. Bankrate has the answers. Our experts have helped you understand your money for over four decades. We continually strive to provide consumers with the expert guidance and the tools necessary to succeed throughout life’s financial journey. Bankrate follows a strict standard of conduct, so you can rest assured that our content is truthful and precise. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content we create by our editorial team is objective, factual, and not influenced by our advertisers. We’re transparent regarding how we’re able to bring quality content, competitive rates and useful tools to our customers by describing how we earn our money. is an independent, advertising-supported publisher and comparison service. We are compensated for the promotion of sponsored goods or services, or when you click on certain links posted on our site. So, this compensation can influence the manner, place 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 home lending products. Other factors, like our own website rules and whether or not a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this website. Although we try to offer an array of offers, Bankrate does not include specific information on every credit or financial item or product. Are you facing financial difficulties and are unable to pay your car payments? If your lender allows modifications to car loans or loans, you might be able to get some much-needed relief. Modifying your loan involves changing your monthly payment amount and due date, or even the interest rate. When you are behind on payments, these options could assist you in avoiding damaging your credit score or having your car repossessed. What exactly is a loan modification means? As the name implies, a car loan modification involves changing the terms of the loan. The lender might agree to reduce your monthly payments, postpone payments for the short-term or change your payment due date so it works best for you budget. You can also get an , which extends the remaining balance on your loan out in order to reduce the monthly payment. However, extending the time for repayment will mean that the lender is able to take more money from the borrower, meaning you’ll be paying higher interest overall unless you’re back on track . The option of loan modification isn’t accessible to all loan borrowers, however. While lenders generally aren’t fond of repossessing vehicles of those who have defaulted on their loans and you’ll need to convince them. One of the most important things to do is convince your lender that you won’t be able to pay the amount you owe until they consent to modifying the terms of your loan. This could involve the submission of financial documents to show that you’re experiencing hardship. How do you obtain a car loan modified ? You’ll need to reach out to the lender who created your loan in person to talk about your situation and determine your eligibility for the loan modification. Be mindful that lenders will generally review your past payment history prior to making a decision. It’s worthwhile to reference the fact that you’ve been a responsible customer and have managed your loan prudently. If you’ve had problems with payment in the past and have a history of late payments, it may be a bit more challenging in convincing the lender to change the terms of your loan. Either way, follow these steps to begin the process. Call your lender immediately. Inform your lender that your auto loan payments are no longer affordable and you could be in debt in the near future. Tell them about your situation and the reason you’re struggling to make payments. The representative might offer the options that are temporary, but you must ask to speak to someone who can help you in your search for a long-term solution. It’s best to mention that you’d like to keep the vehicle but require assistance in achieving this objective. Be specific and use a pleasant tone during the conversation. Make your request in writing If a loan modification is offered, you’ll typically be required to submit your requests in writing. The request will be sent to the lender, along with proof of your hardship as well as any other information or documents that the lender wants. Give the lender the most detailed information feasible about your circumstances. If you have lost your job or suffered a important or sudden life event include that information in your hardship letters. It’s also a good idea to describe how the change will help, such as the ability to continue to make payment or to make payments on time. Your lender might also need financial documentation such as copies of your monthly bills and the bank statement or statements. Confirm that you have received your hardship application. When you’ve turned all documents in, the wait to hear back from the lender commences. While waiting take care to pay what you can, as repossessions can still take place as you wait for the outcome of a loan modification. Keep the person who is helping you with the modification up-to-date, explaining that you’re trying to make your payments amid financial challenges. How do you know if you need to modify your car loan Consider modifying your car loan when your financial situation has abruptly changed because of the loss of your job, a temporary furlough or layoff or medical emergency, or some other event that is out of your control. It might also be a prudent decision if you’ve recently experienced reduced wages. It is also possible to look into the possibility of a loan modification if your car is worth less than the amount you owe. This means you’re . selling your car to buy a more affordable vehicle would make it a lot more difficult and could cost you a fortune. A car loan modification vs. refinancing It’s simple to confuse auto loan modifications with , but both aren’t identical. Both could lead to an easier payment. But unlike the auto loan modification, refinancing your loan is the process of swapping the current loan for a brand new one with different terms. It is likely that you will need good or excellent credit to qualify for the loan, and you’ll need to complete the same application procedure like you did when you took out your current loan. A majority of lenders require will require that your car does not exceed 100,000 miles. You likely won’t be able to qualify if your vehicle is more than 10 years old. When your application for the new loan is accepted then the lender will pay off your previous loan and you’ll begin your payments to the current lender. However, with a loan change, you’ll have to work together with the current lender during the process. The bottom line It can be stressful if you can’t afford your car payment and aren’t in a good situation to refinance but you don’t have the option of doing without a car. You might want to contact your lender to request a car loan modification. Ask about reduced monthly payments or a lower amount of interest or the option of a different due date to help you make payments on time. If you are not able to modify your payment option, there are other programs that will aid you in locating relief until you can get your finances back on track. Find out more


Allison Martin’s writing began over 10 years ago when she was an online content strategist and she’s since been featured in various top financial media, including 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 late 2021. They are passionate about helping readers gain the confidence to control their finances with concise, well-researched, and clear facts that break down complicated topics into digestible pieces.

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