The option to modify your current car loan depends on your auto loan provider's willingness to do so. Some lenders may offer loan modification for financial hardship, allowing you to increase your loan term although you may have to agree to a higher interest rate. If your lender won't work with you, consider refinancing instead.
Talk to Your Lender
Call your auto loan provider to ask if it offers any loan modification options. If you're experiencing some form of financial hardship, such as unemployment or disability, your lender may offer the option to extend your term if you can prove the hardship. Expect to prove your hardship before modifying the loan amount. If your lender does agree to modify your loan, consider your vehicle equity before moving forward. If you add another year to your loan and obtain a higher interest rate, your monthly payment will decrease but it'll take longer to pay off the loan and create vehicle equity.
Paperwork Requirements
Submit any documents that your lender requires to obtain the loan modification. If your lender is local, bring your paperwork into a local branch. If not, email or fax your documents quickly. Once your loan provider accepts your loan modification request, you must resign your bank contract. A verbal agreement will not stop repossession if you are behind on your loan payments, so make sure you get any modification offers in writing. Save a copy of any paperwork that you sign.
Refinancing
Loan modification options are often limited. Aside from extending your loan term to lower your monthly payment, your lender might not offer other options. If you want a lower interest rate or shorter term, consider refinancing, or applying to a different lender for your loan's payoff amount. Check the interest rates of banks and credit unions in your area as well as those of online auto loan providers. A lending representative can let you know how much your monthly payment will decrease or how much money you'll save over the term of your loan so that you can decide if refinancing is beneficial.
Benefits of Refinancing
A lower interest rate can save you thousands of dollars over the term of your loan, depending on the total amount you borrow. You may also find that you can decrease your loan term with a lower interest rate and still pay the same monthly payment or less. If you have a down payment to put toward a refinance, you can also lower overall loan costs. Even if your credit has suffered, you can use a co-signer to secure your auto loan and still take advantage of lower rate or term benefits.
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