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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 decisions by offering you interactive tools and financial calculators that provide objective and original content, by enabling you to conduct research and compare data for free – so that you can make informed financial decisions. Bankrate has partnerships with issuers such as, 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 come 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 be listed within the categories of listing, except where prohibited by law. Our mortgage home equity, mortgage and other products for home loans. But this compensation does not influence the information we provide, or the reviews that you read on this site. We do not cover the vast array of companies or financial deals that might 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 media strategist, and she’s since been published in several leading 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 writing and editing for Bankrate since late 2021. They are passionate about helping readers gain the confidence to manage their finances with concise, well-researched and precise facts that break down complicated topics into bite-sized pieces. The Bankrate guarantee

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You have money questions. Bankrate can help. Our experts have been helping you manage your finances for more than four years. We are constantly striving to provide our readers with the professional guidance and the tools necessary to be successful throughout their financial journey. Bankrate adheres to strict standards policy, which means you can be confident that our information is trustworthy and precise. Our award-winning editors and reporters provide honest and trustworthy information to assist you in making the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced from our advertising. We’re transparent about the ways we’re in a position to provide quality information, competitive rates and helpful tools to you by explaining how we earn money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We receive compensation for the placement of sponsored products andservices or through you clicking certain hyperlinks on our site. This compensation could affect the way, location and in what order the products are listed within categories, with the exception of those prohibited by law for our mortgage, home equity and other products for home loans. Other factors, like our own proprietary website rules and whether or not a product is available within the area you reside in or is within your self-selected credit score range could also affect the manner in which products appear on this site. While we strive to provide a wide range offers, Bankrate does not include details about every credit or financial product or service. Are you facing financial difficulties and struggling to afford your car payment? If your lender offers modifications on car loans, you may be able to obtain much-needed relief. Loan modification involves adjusting the amount of your monthly payments and due date, or even your interest rate. When you are behind on payments, these options can assist you in avoiding ruining your credit score or getting your car taken away. What is a car loan modification is like the name suggests it is a loan modification is the process of altering the terms of your loan. The lender might be willing to lower the amount of your loan, delay your payments for a short period or change your payment due date so that it is better for your budget. There is also the option of getting an , which stretches the remaining balance of your loan out, allowing you to reduce your monthly payments. However, extending the time for repayment will mean that your lender has more time to collect money from you, so you’ll pay more interest overall until you are back on track and . The option of loan modification isn’t available to all borrowers, however. Although lenders are generally not fond of repossessing their vehicles borrowers who’ve defaulted on their loans and you’ll need to convince them. Part of that is convincing that lender that you won’t be able pay back what you owe unless they consent to modifying the terms of your loan. This could involve providing financial documentation to prove that you’re facing difficulties. How to get a car loan changed You’ll have contact the lender who created the loan in person to talk about your circumstances and determine your eligibility for an loan modification. Be mindful that lenders will usually review your credit history prior to making a decision. It’s important to prove your past performance as a good customer and handled your loan prudently. If you’ve had problems with payments before, it could be more difficult to convince the lender to change the terms of your loan. Either way, take these actions to begin the process. Contact 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’re struggling to make payments. The representative may share temporary options for relief but you must ask to speak to someone who can help with an option that is long-term. It’s helpful to explain that you want to keep the vehicle but require assistance in achieving your objective. Make it clear, and use a friendly tone during the call. Write your request down If a loan modification is offered 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. You must provide the lender the most detailed information feasible about your circumstances. If you lost a job or experienced some other important or sudden life event include that information in your hardship letters. It’s an excellent idea to outline how the change will help, such as allowing you to continue making payments or make payments on time. Your lender might also need documents related to finances, such as the copies of your monthly bills and statement from your bank or stubs. Confirm receipt of your hardship request Once you turn all the documents in, the waiting game to hear back from the lender starts. While waiting make sure you pay as much as you can as repossession can occur in the meantime you’re waiting for a decision on loan modification. Keep the person who is helping you to modify your loan up-to-date, explaining that you’re still trying to make your payments when you face financial hardship. How to know if you need to modify your car loan Think about modifying your car loan if your financial situation has abruptly changed because of an unexpected job loss, temporary layoff or furlough or medical emergency, or any other circumstance out of your control. It might also be a smart decision if you’ve recently had a decrease in your earnings. You may also want to consider an loan modification in the event that your car is worth less than the debt you have. It means you’re . selling your car to buy an affordable car could prove to be rather challenging and can cost you a lot. The auto loan modification and. refinancing It’s easy to mix the auto loan modifications with , but they’re not the same. Both could lead to lower payments. 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. You’ll likely need good or exceptional credit score to be eligible for the loan, and you’ll need to undergo the same application procedure similar to the one you went through when you applied for your current loan. Most lenders also that the mileage on your vehicle doesn’t exceed 100,000 miles. You are unlikely to be eligible when your vehicle is older that 10 years older. When you apply for the loan is accepted and the lender will repay your old loan and you’ll begin payment with your new lender. But with a car loan modification, you’ll have to work with your current lender through the whole process. The bottom line is that it can be stressful if you can’t afford your car payment and aren’t in the best position to refinance, but don’t quite have the option to go without a car. You might want to contact your lender to request a loan modification. Consider requesting a lower monthly payment, a decreased amount of interest or the option of a different due date if that will assist you in making payments punctually. If a modification isn’t an option, there may be other programs that will help you find relief until you can get your finances back on track. Learn more

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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, 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 from late 2021. They are committed to helping readers to take control of their finances with concise, well-researched, and clear details that cut complex subjects into bite-sized pieces.

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