Auto loans, next to mortgages are one of the biggest monthly expenses that we face on a monthly basis. For those who may have lost their job, are faced with an unexpected expense or some other situation where you will miss your auto loan payment you might want to investigate the possibilities of obtaining a loan restructure.
Loan modifications are exactly as they sound, a re-negotiation of your current loan so you can get back on track with your payments. Loan modifications are usually the last resort before the lending company repossesses your vehicle. This is because lending institutions are loathed to change their loans, especially if they believe that you will not pay them the money that is owed.
However, lenders often will choose loan modifications over having to repossess the vehicle if they feel they will lose money. Given the expense of repossession and the issues with re-selling vehicles, loan modifications are generally a popular choice.
Are Loan Modifications the Right Choice?
Before you start the process of loan modifications to save your vehicle, there are some considerations you will have to make before you begin.
Owe More than It’s Worth: If this is the case, then loan modifications may be the right approach. Since you couldn’t make money on the vehicle even if you sold it, lending institutions are more willing to make modifications to help save your vehicle. Otherwise, they would be out a considerable amount of money since you otherwise could not make the payments.
Unemployment: With so many people losing their jobs, it’s not surprising that auto loans are usually one of the hardest payments to make. Under such circumstances, having loan modifications performed can help get you through this process until you can find employment.
How to get a Loan Modification
If it seems that it is the only way to reduce your auto loan payment examine all the facts, then you will need to do the following.
Call the Lender: Naturally, the first thing you will hear from the lender is the dangers of missing payments and having your vehicle repossessed. While there is no guarantee that a lender will grant the modification, there is no harm in asking either. Remember that only the lender who offered the original loan can modify it for you. This means that if you go to an outside source to that offers to modify your loan. That is more than likely refinancing instead.
Have Everything Prepared
If you get approval for a loan modification, you will need documentation that shows why you need the changes. This includes all of your relevant bills, statements, pay stubs and other documents. You should also include a hardship letter that explains why you can no longer make the payments at the going rate. This means being honest about your situation and providing the documentation to back it up.
Once you have submitted everything, the final step is to simply wait and see what will happen. You really cannot do much at this point. You will want to pay what you can on the loan so that if the modification is approved, it may actually help your situation even further. Auto loans can be very difficult to pay when the money is not around, but loan modifications can help you overcome this situation.