Car Loan Modification

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When car owners get in over their heads and find in difficult to meet their auto loan repayments, a loan modification may help out. While many have never heard of this for car loans, it has been widely used in the home market. It has also been used in the commercial world. This allows them to have more money available for daily needs.

Who Would Qualify for a Loan Modification?

Anyone who has a car loan that is less than three months past due can qualify for car loan modification. This decision is up to the lender, who frequently wants the money more than repossession. The key is to work with the lender before things get out of control.

Many people fail to understand that lenders will work with you if you contact them first. Realize that some lenders will charge a fee for this. In the end, you have to talk with them and see how it applies to your situation. If you have a car loan that is higher than your ability to pay for a short period of time, this could work very well for your finances.

Some lenders will require proof of hardship in order to qualify for a loan modification. While they do not always require this, it is important to discuss it. This is how it normally will break down.

The lender will require some form of proof in a document from you. This could be a simple one-time thing. It could also be each time a payment is coming due. Some lenders will actually only do this once for you over a couple of months. Here are some examples of documents that might be required.

  • Medical statements
  • Letter from employer
  • Bank statements
  • Tax statements

Medical statements are required if your hardship will result in a temporary pause of payment. This is for those people that have a really temporary issue that extends beyond one month. In fact, many lenders will allow you to miss one payment if you simply call them and let them know that you have a situation that is temporary.

Letters from an employer can be required if the situation is a job switch which causes a break in cash flow. This enables the lender to see that money will be available in the next statement period. While they might require a fee for this, it is a solution when this situation applies to your life.

Bank statements might be required if the lender is concerned that you are not able to meet the payments once the extension is over. This can happen if you have not had a period of time with a lender. It proves your financial viability if you are required to prove it.

In rare cases the lender might require the last tax statement to show proof of either financial viability in the past or hardship over an extended period of time. This one is generally used when the government intervenes on your behalf. Some people on welfare might be required to do this to maintain their note. While many lenders will not allow this, some do when the borrower makes the request. The important point to notice is that you have to ask for it.

Any of these situations might apply at any given time. The key is to ask for help before it gets too late. Some companies can help you out when times get hard. You have to ask though for this to happen.

Car Loan Modification When Hardship is Not the Issue

Some people are not experiencing any financial hardship. They simply want to pay less because their financial situation requires it. They might have better credit now and are capable of getting better rates. In these situations, the lender will be able to restructure the loan. This type of modification is easy to do and is available to those that qualify. This is what you need in order to qualify for a car loan modification that is not financially based on hardship.

  • You have improved credit rating since the original loan was created.
  • You have the financial ability to make the payments on time based on your previous payment schedule.
  • You can show proof of income and qualify for the new loan.

This is like applying for a loan from scratch. The exception is the fact that you have made payments on this car already. Many people take this option when they have bad credit that will improve. This means that they had poor credit when they applied for the original loan. Now they have credit that is far better. They now want to apply for better terms for their car loan. The creditor can restructure or modify the original loan based on your improved financial credit.

Another situation that might desire car loan modification is when a borrower has more than one vehicle. They wish to modify their car loan to include the payments on their other vehicles. In this case, the borrower consolidates the payments into one car payment. This saves money in many cases. While it is risky in the event of financial hardship, some find it beneficial. It is worth checking into if you have more than one car and high bills that you want to save money with.

Some Questions

You might have some questions about this whole process. This could mean that you simply have to clarify an issue that might prevent you from going forward with car loan modification. Take a moment and write those down and ask them when you call your lender. That way you are prepared when you call the lender.


Most people that have car loans find that loan modification is beneficial to their finances. It can fix a temporary issue or even save money over the course of the loan. Either way, it is a winning thing for someone who needs some help with their financial situation on a car loan.