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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 offering you interactive tools and financial calculators that provide objective and original content. This allows users to conduct research and compare information for free – so that you can make sound financial decisions. 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 offers that appear on this site are from companies that pay us. This compensation can affect the way and when products are featured on this website, for example such things as the sequence in which they appear in the listing categories, except where prohibited by law. This applies to our mortgage home equity, mortgage and other products for home loans. However, this compensation will not influence the content we publish or the reviews that you read on this site. We do not cover the entire universe of businesses or financial offerings that could be open to you. KDP/Getty Images

4 min read Published October 27, 2022

Written by Allison Martin Written by Allison Martin’s career began more than 10 years ago as a digital media strategist. She’s been published in numerous prestigious financial publications, including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Written by Rhys Subitch Editor: Auto loans Editor Rhys has been writing and editing for Bankrate from late 2021. They are passionate about helping readers gain the confidence to control their finances with detailed, well-studied facts that break down complicated topics into bite-sized pieces. The Bankrate guarantee

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There are money-related questions. Bankrate has answers. Our experts have helped you understand your finances for more than four decades. 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 strict standards standard of conduct, so you can rest assured that our content is honest and reliable. Our award-winning editors and journalists provide honest and trustworthy content that will help you make the best financial decisions. Our content produced by our editorial team is objective, factual and is not influenced through our sponsors. We’re open about the ways we’re able to bring quality content, competitive rates, and helpful tools to you by explaining how we earn our money. is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products or services, or by you clicking on certain hyperlinks on our site. This compensation could 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 and other products for home loans. Other factors, such as our own proprietary website rules and whether the product is offered in the area you reside in or is within your personal credit score can also impact the way and place products are listed on this site. Although we try to offer the most diverse selection of products, Bankrate does not include details about every financial or credit products or services. Are you facing financial difficulties and are unable to pay your vehicle 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 your interest rate. When you are behind in your payments, these choices can help you avoid ruining your credit score or having your car repossessed. What car loan modification means? As the name implies the term “car loan modification entails altering the terms of your loan. The lender might be willing to lower your , defer your payments in the short term or change the due date to work best for you budget. It’s also possible to get an , which spreads the remaining balance on your loan out to lower your monthly payments. However, the extended repayment time also means your lender is able to take more money money from the borrower, meaning you’ll be paying higher interest overall unless you’re back on track and . The option of loan modification isn’t accessible to all borrowers however. Though lenders tend to be wary of repossessing their vehicles people who’ve fallen behind on their loans and you’ll need to convince them. The first step is convincing the lender that you won’t be able to pay what you owe unless they accept a modification to the terms of your loan. This could involve the submission of financial documents to show you are experiencing hardship. How do you obtain a car loan modified ? You’ll need to reach out to the lender who originated the loan direct to clarify your circumstances and determine your possibility of an loan modification. Be aware that lenders usually review your credit record prior to deciding. It’s worthwhile to reference your past performance as a good customer and have managed your loan responsibly. But if you’ve missed payments in the past it might be a bit more challenging for you to persuade the lender to alter your loan. Whatever the case you must follow these steps to begin the process. Call your lender immediately. Notify your lender that the auto loan payments are no longer feasible and you are at risk of falling behind quickly. Explain your circumstances and why you are struggling to make payments. The representative can offer the options that are temporary, but ask to speak with someone who can help with an option that is long-term. It’s helpful to state that you would like to keep the car, but need help accomplishing this objective. Be specific and use a friendly tone throughout the phone conversation. Put your request in writing If loan modification is offered and you’ll usually be asked to make your requests 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 the most detailed information feasible about your circumstances. If you have lost your job or experienced some other significant or unexpected life change you should include this details in your hardship letter. It’s an excellent idea to explain how the modification will help, such as permitting you to continue making payments or making payments in time. Your lender might also need financial documentation such as documents from your monthly bills , bank statements or pay stubs. Verify the receipt of your hardship request After you have turned all of documents into the lender, the process of waiting to hear from the lender commences. If you’re not hearing back, try to pay what you can as repossession can continue to occur while you are awaiting the outcome of a loan modification. Keep the people who are helping with your modification up-to-date, explaining that you’re still trying to make your payments amid financial challenges. How do you know if you need to modify your car loan You should think about changing your vehicle loan in the event that your financial situation suddenly changed due to a job loss, temporary furlough or layoff or medical emergency, or some other circumstance out of your control. It might also be a prudent decision if you’ve recently had a decrease in your earnings. You might also want to consider the possibility of a loan modification if your vehicle is worth less than the debt you have. It means you’re . selling it to purchase an easier to afford vehicle could be a challenge and could cost you a fortune. The auto loan modification is different from. refinancing It’s easy for people to confuse auto loan modifications with refinancing, however the two aren’t quite identical. Both may lead to a lower payment. 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 outstanding credit to be eligible and undergo the same application process as you did when you got the current loan. The majority of lenders will also require insist that the mileage of your car does not exceed 100,000 miles. You are unlikely to be eligible when your vehicle is older than 10 years old. If your application for the new loan is accepted and the lender will repay your previous loan, and you’ll resume payment with your new lender. With a loan modifications, it’s your responsibility to be working together with the current lender throughout the entire process. The bottom line: It could be stressful if you can’t afford your car payment and aren’t in a situation to refinance, however, you don’t have the option of doing without a car. Think about contacting your lender to ask for a loan modification. Consider requesting a lower monthly payment and a reduced interest rate, or an alternate monthly due date if that will assist you in making payments punctually. If you are not able to modify your payment option, there may be other programs that will assist you until you can get your finances back in order. Find out more


Allison Martin’s writing 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 The article was edited 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 to take control of their finances through providing clear, well-researched information that breaks down otherwise complex subjects into bite-sized pieces.

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