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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 that provide objective and original content. This allows you to conduct your own research and compare information at no cost and help you make sound financial decisions. Bankrate has agreements with issuers, including but not restricted 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 that compensate us. This compensation could affect how and where products appear on the site, such as for instance, the order in which they may appear in the listing categories in the event that they are not permitted by law for our mortgage or home equity products, as well as other products for home loans. But this compensation does not influence the content we publish or the reviews that you read on this site. We do not include the vast array of companies or financial offers that may be accessible 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 prior to that 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 Credit.com. Written by Rhys Subitch Edited by Auto loans Editor Rhys has been editing and writing for Bankrate since late 2021. They are dedicated to helping readers gain the confidence to control their finances by providing concise, well-researched and precise information that breaks down otherwise complicated topics into bite-sized pieces. The Bankrate promise

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There are money-related questions. Bankrate can help. Our experts have been helping you manage your money for over four years. We continually strive to provide our readers with the professional guidance and the tools necessary to be successful throughout their financial journey. Bankrate adheres to a strict code of conduct policy, which means you can be confident that our information is trustworthy and accurate. Our award-winning editors, reporters and editors provide honest and trustworthy content that will help you make the best financial decisions. The content created by our editorial team is objective, factual and uninfluenced by our advertisers. We’re honest regarding how we’re able to bring quality information, competitive rates and useful tools for you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated for placement of sponsored products andservices or when you click on certain hyperlinks on our website. Therefore, this compensation may influence the manner, place and when products are displayed within the listing categories, unless prohibited by law for our mortgage home equity, mortgage and other products for home loans. Other factors, like our own website rules and whether the product is offered in your region or within your self-selected credit score range could also affect the manner in which products appear on this site. Although we try to offer a wide range offers, Bankrate does not include specific information on each credit or financial product or service. Are you experiencing financial hardship and are unable to pay your car payments? If your lender provides modifications on car loans, you may be able to obtain needed relief. Modifying your loan means adjusting the amount of your monthly payments, due date or sometimes the interest rate. If you’re in debt with your payments, these options can help you avoid damaging your credit score or the possibility of having your vehicle repossessed. What car loan modification means? as the name suggests, a car loan modification is the process of altering the terms of your loan. The lender may agree to lower your monthly payments, postpone 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 spreads the remaining balance that you 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 is able to take more money payments from the borrower, meaning you’ll be paying more in interest, unless you get back on track . Modification of loan terms isn’t readily accessible to all borrowers though. Although lenders are generally not fond of repossessing the vehicles of those who have defaulted on their loans however, you’ll need to convince them. One of the most important things to do is convince that lender that you will not be able pay back the amount you owe until they consent to modifying your loan. This may require the submission of financial documents to show that you’re experiencing hardship. How do you obtain a car loan modified ? You’ll need contact the lender who created your loan directly to discuss your situation and determine your eligibility for the loan modification. Be aware that lenders generally review your past payment record prior to deciding. It’s beneficial to show that you’ve been a good customer and have managed your loan in a responsible manner. But if you’ve missed payment in the past, it could be more difficult for you to persuade the lender to change your loan. Either way you must adhere to these guidelines to start the process. Make contact with your lender immediately. Notify your lender that your auto loan payments aren’t affordable anymore and you risk falling behind quickly. Tell them about your situation and the reason you’re struggling to make payments. The representative might offer some temporary solutions, but ask to speak with someone who can help with a long-term solution. It’s a good idea to state that you would like to keep the vehicle but require assistance in achieving this goal. Be specific, and use a calm tone when you call. Put your request in writing If a loan modification is available in most cases, you’ll be required to put your requests in writing. The request should be submitted to the lender along with evidence of your hardship and any other documents or information that the lender requests. Provide the lender the most detailed information feasible about your circumstances. If you lost your job or had a important or sudden life event, share that information in your hardship letter. It is important to explain how the modification can help, for instance the ability to continue to make payment or to make payments on time. Your lender might also need financial documents, like documents from your monthly bills , statement from your bank or statements. Confirm the receipt of your hardship request Once you turn all documents in, the wait to hear back from the lender starts. In the meantime, try to pay what you can, as repossessions can still take place as you wait for the outcome of a loan modification. Keep the people who are helping to modify your loan on the ball, letting them know that you are still trying to make payments even when you face financial hardship. How to know if you need to modify your car loan You should think about changing your car loan in the event that your financial situation has suddenly changed as a result of an unexpected job loss, temporary furlough or layoff, medical emergency or another event that is out of your control. It might also be a smart financial move if you have recently experienced reduced wages. You may also want to consider an loan modification if your car is worth less than what you owe. That means that you’re . selling your car to buy an affordable car could make it a lot more difficult and can cost you a lot. Auto loan modification is different from. refinancing It’s easy for people to confuse auto loan modifications with refinancing, but the two aren’t quite the same. Both may lead to lower payments. However, unlike the auto loan modification, refinancing your loan will require you to swap your current loan for a new one with different conditions. You’ll probably need excellent or exceptional credit score to be eligible for the loan, and you’ll need to go through the same application process as you did when you got your current loan. Most lenders also that the mileage on your vehicle doesn’t exceed 100,000 miles. You are unlikely to be eligible if your vehicle is more than 10 years old. If an application to get a new loan is approved and the lender will pay off your previous loan and you’ll begin payment with your new lender. But with a car loan modification, you’ll be working together with the current lender during the process. The bottom line is that it can be stressful when you cannot pay for your car and aren’t in a situation to refinance but don’t quite have the option to go without a vehicle. Think about contacting your lender to ask for a loan modification. Request a reduction in monthly payments, a decreased amount of interest or an alternative due date, if it will assist you in making payments on time. If a modification isn’t an option, there may be other programs that will aid you in locating relief until you get your finances back on track. Learn more

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Allison Martin’s writing began more than 10 years ago as an online content strategist and she’s since been published in several leading financial outlets such as The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are dedicated to helping their readers gain the confidence to manage their finances by providing precise, well-researched and well-researched details that cut otherwise complicated topics into digestible pieces.

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