An auto loan modification may be able to help you maintain your car and prevent repossession if you are substantially overdue on your payments. Modifications to your monthly payments (and, in some instances, your interest rate) are simple alterations made to assist you in avoiding repossession. OakPark’ Emergency Cash Loans may occasionally approve loan adjustments as a last-ditch attempt to save the automobile from being repossessed. You won’t be able to change your auto loan with all banks. If you know you won’t be able to make the payments, though, it’s pointless to attempt.
Are You a Good Candidate for a Car Loan Modification?
Because modifying a vehicle loan may be a long and arduous procedure, you should be sure it is the appropriate option before moving further. A vehicle loan adjustment may be necessary for the following circumstances:
- Car Loan on the Wrong Side of the Tracks: If you owe more on your automobile loan than it’s worth and wouldn’t be able to pay it off even if you sold it, you may be eligible for a loan modification. Although a car loan modification is not the same as refinancing, it may provide some of the same advantages. The bank with whom you have a current loan may be able to reduce the loan amount for you, allowing you to escape what may seem to be an impossible scenario.
- Job Lay Off: If you’ve been laid off due to the economic crisis, or if your income has changed in some other way, keeping up with your auto payments may seem like a losing battle. You might be entitled to file for a loan modification if you had been paying your payments until a recent incident affected your capacity to do so.
- Vehicle Depreciation: You may be qualified for a car loan modification if your vehicle isn’t worth what you owe owing to financial difficulties or unintentional injuries that weren’t your fault. You may or may not be authorized based on these conditions, but you may always speak to the bank about your choices.
Why Do Lenders Let You Modify Your Auto Loan?
According to Algernon Ronson of Oak Park Financial Because they stand to lose money (typically) in a repossession, it is in the lending company’s best interest to accommodate the consumer’s requests. Lenders do not want to repossess automobiles because of the hassles of preparing them for resale. According to statistics, the expenses of resale and auction have risen considerably over the last decade.
How to Get a Loan Modification for a Car
Now that you’ve determined that a vehicle loan modification is the best option for you, here are some measures you can do to improve your chances of getting your monthly payments reduced:
Step 1: Contact your lender.
Notify your lender that you can no longer make payments in the manner in which they are presently structured. Your lender will immediately inform you of the risks of not making payments and the threat of repossession if you do not. They don’t want your automobile in the end.
Many banks are more amenable to the concept of a loan modification the more behind you are on your payments. However, there is no assurance that your bank will agree to modify your loan.
As a general rule, only the lender who made the original loan will be allowed to amend it for you. Another alternative is to work with a lawyer. This is less common since you will have to pay legal expenses, and the attorney will already be dealing with the lender. If you come across a company that offers to modify your vehicle loan outside of your original lender, they’re most likely suggesting a loan refinancing. It may not be a terrible concept, but you must realize that it is not a change.
Step 2: Gather your documents
If your bank agrees to a loan modification, they will almost probably ask for proof of your financial difficulty or reasons for not making your payments. Copies of phone or utility bills, notarized letters or affidavits, bank statements, pay stubs, and other documents may be needed. Send your lender all of the documentation they have asked for.
- Letter of Suffering: You’ll need to write a hardship letter to the lender in most circumstances. The rationale for your request for a change should be stated in your letter. Medical costs, job loss, death of a family member, divorce, military deployment, or even a failing company are all factors that the lender would consider. Remember that if your expenditures caused hardship, you might not be eligible for a loan modification via the lender. Make the letter personal to what you’re going through by being honest. Several websites will give you examples; nevertheless, do not replicate them.
Step 3: Wait and see what happens.
There’s not much you can do once you’ve provided all of the lender’s needed papers except wait. It’s also worth noting that repossessions might happen when you’re asking for a loan modification. Departments within the same bank often fail to interact effectively. If repossession happens, the modification department will be powerless to assist you. Even if you’re seeking a loan modification, make an effort to contribute to your existing monthly installments. Also, request that the modification department notify the repossession team of your plans.
Step 4: Weighing Your Alternatives
When you alter a loan, the lender may give you various options. The lender may reduce the interest rate and waive any costs related to delinquencies in particular instances. The lender may also agree to accept late payments and apply them to the rear-end loan. This will bring the loan up to date and reduce your interest rate to a manageable level. If this isn’t enough, contact the lender to see if the loan amount may be reduced. If you have a precise word in mind, you’ll be much better off. If you’ve lost your job, your lender may agree to lower your payments until you find another one. Instead, they may give you a certain length of time. Simply speak with the lender and see what they can come up with.
- Refinancing: Another alternative is to contact other firms to see if they would be willing to risk the loan for a new set of conditions. A different financing firm may give a cheaper interest rate or prolong the term of the present loan in many cases. Both will reduce your monthly payments (though you may pay more in interest if you stretch your current loan term) and save you money throughout the loan’s life. Just keep in mind that this is a different kind of “refinancing” than an auto loan modification.
Everyone has financial difficulties at some point in their lives, so you shouldn’t feel guilty or humiliated if you need to adjust the conditions of your auto loan. You may prevent putting yourself into even worse trouble by having a repossession on your record by being proactive and aggressively attempting to alter your payments. You should go back on the path to complete vehicle loan payments by following the procedures outlined above.