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 as well as publishing quality and impartial content. This allows you to conduct research and compare data for free - so that you can make sound financial decisions. Bankrate has agreements with issuers such as, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The deals that are displayed on this site come from companies that compensate us. This compensation could affect how and where products appear on this site, including such things as the order in which they may be listed within the categories of listing and other categories, unless prohibited by law. This applies to our mortgage home equity, mortgage and other products that lend money to homeowners. However, this compensation will not influence the information we provide, or the reviews that you read on this site. We do not cover the universe of companies or financial deals that might be open to you. KDP/Getty Images

4 min read Published 27 October 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 publications, including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com. 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 the confidence to manage their finances with clear, well-researched information that breaks down otherwise complex topics into manageable bites. The Bankrate guarantee

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who ensure everything we publish ensures that everything we publish is accurate, objective and trustworthy. The loans journalists and editors focus on the points consumers care about most -- the various types of loans available, the best rates, the best lenders, how to pay off debt and more -- so you can feel confident when making a decision about your investment. Editorial integrity

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There are money-related questions. Bankrate can help. Our experts have helped you understand your finances for more than four decades. We are constantly striving to give our customers the right advice and tools required to make it through life's financial journey. Bankrate adheres to strict standards standard of conduct, so you can rest assured that our information is trustworthy and accurate. Our award-winning editors, reporters and editors provide honest and trustworthy information to assist you in making the right financial decisions. The content created by our editorial team is factual, accurate, and not influenced through our sponsors. We're honest about the ways we're able to bring quality content, competitive rates and useful tools for our customers by describing how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We receive compensation for placement of sponsored products and, services, or when you click on certain hyperlinks on our website. Therefore, this compensation may impact how, where and in what order products are displayed within the listing categories, unless prohibited by law for our mortgage, home equity and other home lending products. Other factors, like our own website rules and whether or not a product is offered in the area you reside in or is within your self-selected credit score range can also impact the manner in which products appear on this site. Although we try to offer the most diverse selection of products, Bankrate does not include details about every credit or financial product or service. Are you struggling financially and struggling to afford your car payment? If your lender allows modifications to car loans, you may be able to obtain needed relief. Modifying your loan means adjusting your monthly installment amount as well as the due date and sometimes your 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 can you do? like the name suggests, a car loan modification entails altering the terms of your loan. The lender might agree to reduce the amount of your loan, delay your payments for a short period or alter your due date to work best for you budget. There is also the option of getting an , which stretches the balance that you loan out, allowing you to reduce your monthly payments. However, extending the time for repayment will mean that the lender will have more time in collecting from you, which means you'll have to pay higher interest overall unless you're back on track . The option of loan modification isn't accessible to all borrowers though. Though lenders tend to be wary of repossessing vehicles of borrowers who've defaulted on their loans however, you'll need to plead your case. One of the most important things to do is convince that lender that you won't be able to repay the amount you owe until they agree to modify the terms of your loan. This may require providing financial documentation to prove that you're experiencing hardship. How to get a car loan changed You'll have contact the lender who originated your loan in person to talk about your situation and determine your possibility of an loan modification. Be aware that lenders typically review your payment history before making a decision. It's important to prove your past performance as a good customer and handled your loan prudently. But if you've missed payments before, it could be a bit more challenging for you to persuade the lender to modify your loan. Whatever the case you must take these actions to begin the process. Make contact with your lender right away Notify your lender that your auto loan payments are no longer affordable and you risk falling behind quickly. Tell them about your situation and the reason you're having difficulty making payments. The representative might offer temporary options for relief however, you should ask for someone who can assist with an alternative that lasts. It's a good idea to explain that you want to keep the car, however you need assistance to achieve this target. Be specific and use a calm tone during the call. Make your request in writing If a loan modification is possible, you'll typically be required to make the request on paper. The request should be submitted to the lender together with proof of your hardship and any other information or documents the lender requests. Provide the lender the most detailed information feasible about your circumstances. If you have lost your job or suffered a important or sudden life event, share that information in your hardship letters. It's important to explain how the modification will help, such as allowing you to continue making payment or to make payments on time. Your lender might also need documents related to finances, such as copies of your bills for the month and bank statements or pay stubs. Confirm receipt of your hardship request Once you turn all documents in, the waiting game to hear from the lender begins. In the meantime make sure you pay as much as you can, as repossessions can still take place while you are awaiting a decision on loan modification. Keep the team helping to modify your loan up-to-date, explaining that you are still trying to make payments even amid financial challenges. What are the signs that you should modify your car loan Consider modifying your vehicle loan if your financial situation has abruptly changed as a result of the loss of your job, a temporary layoff or furlough or medical emergency, or some other event that is out of your control. It might also be a wise financial move if you have recently experienced reduced wages. It is also possible to explore a loan modification if your vehicle is worth less than what you owe. That means that you're . selling it to purchase an easier to afford vehicle could prove to be rather challenging and could end up costing you a significant amount. The auto loan modification and. refinancing It's simple to make a mistake when comparing auto loan modifications with , but the two aren't quite identical. Both may lead to an easier payment. But unlike auto loan modification refinancing your loan involves swapping your current loan to a new loan with different conditions. You'll probably need excellent or excellent credit to qualify for the loan, and you'll need to go through the same application procedure like you did when you applied for your current loan. Most lenders also will require that your car does not exceed 100,000 miles, and you likely won't be able to qualify for a loan if your car is more that 10 years older. When an application to get a new loan is accepted and the lender will pay off your old loan, and you'll resume your payments to the current lender. However, with a loan modification, you'll work together with the current lender during the process. The bottom line It can be stressful when you cannot pay for your car and aren't in a situation to refinance but you don't have the option of going without a vehicle. Think about contacting your lender to request a loan modification. Consider requesting a lower monthly payment and a reduced amount of interest or even an alternative due date if that will assist you in making payments on time. If you are not able to modify your payment option, there may be other programs to aid you in locating relief until you can get your finances back in order. Learn more

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Written by Allison Martin's work started over 10 years ago, as an online content strategist and since then she's been published in a variety of top financial publications, including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are committed to helping readers gain the confidence to take control of their finances by providing concise, well-researched, and clear details that cut otherwise complicated topics into digestible pieces.

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