If you have fallen on hard times, or your car has depreciated in value, and you can’t afford to make payments, a loan modification might be your best option. Loan modifications are available for all kinds of loans. Still, they are especially common in the auto industry because cars are so expensive and because of their high monthly payments compared with other types of debt.
What Is a Car Loan Modification?
A loan modification is a change to the terms of your car loan. It can be used to lower your monthly payments, extend the term of your loan, or change the interest rate.
A modification doesn’t necessarily mean you will get all three changes. It depends on what makes sense for you and your lender. For example, if you are having trouble making ends meet with a large payment each month but only have a few years left on your term before paying off most or all of your balance anyway, you may want to consider extending rather than reducing payments (or vice versa).
How To Get a Car Loan Modified
It’s not always as simple as it seems to get your car loan modified. The process is more complicated than simply calling your lender and asking them to change your monthly payment, but it can be done. Here are some tips on how to get a car loan modified.
Contact Your Lender Right Away
Contact your lender immediately if you are eligible for a loan modification.
Notifying your lender that you need help before you miss a payment can help your case, but it’s best to get informed and begin the process as soon as possible.
Put Your Request in Writing
To get a car loan modified, you must write your request and mail it to the lender. The letter can be as simple or detailed as you like. Just include all the information necessary for the bad credit car dealers to overview your case accurately.
How To Know if You Should Modify Your Car Loan
If you are having trouble making your monthly payments or are at risk of defaulting on the loan, it may be time to consider a modification. If your interest rate is high, or if the loan term is longer than 3 years and has negative equity (what you owe on the car exceeds its value), then this could also indicate that a modification would benefit you financially.
Auto Loan Modification Vs. Refinancing
A car loan modification is when you get your lender to lower the interest rate or extend the term of your auto loan. On the other hand, a car loan refinance involves taking out a new loan with a different lender and using it to pay off your existing one.
The latter option may be better if you have bad credit or have been late on payments in the past. But if you are trying to save money by reducing monthly payments, then getting car loan Calgary modified could be worth considering, especially if you already make regular payments on time and want to keep things that way.
Takeaway
Knowing there are options is important if you are struggling to make your car payment. With a car loan modification, you can keep your car and lower your payments by extending the time between payments or lowering the interest rate.
