Most people who take out auto finance base the affordability of their loan on their income and capacity to meet their repayments at the time of financing. Rarely do people anticipate a change in their financial situation, but, when faced with a decline in income, auto loan repayments can often be difficult to meet. This is where car loan modification can help you through a difficult financial position with your credit rating still in good standing.One thing that most reputable lenders will want to avoid is their customers defaulting on their loan repayments. Chasing up bad debt through the legal system can be costly for lenders and for this reason many of them will be open to car loan modification if you are at risk of defaulting on your finance agreement. Car loan modification is quite simply measures that lenders will be prepared to set up in your loan contract to make your loan more affordable in your current situation. These changes may be short term or long term and will be established on an individual basis, based on the needs of the clients.The most common form of car loan modification is an increase in the term of your loan. Many lenders may allow you to refinance your auto loan for a longer period of time to help reduce your monthly repayments. This option can often be very beneficial to people who are more than half way through their finance term as the refinancing amount is based on the balance of your loan. This means that you will be refinancing a lower amount over a longer term and so this type of car loan modification can reduce your repayments quite considerably.If your financial difficulties are caused by temporary unemployment, some lenders may be able to freeze your repayments for a month or two to give you time to find employment and get back on your feet. This type of car loan modification, however, is not available through every finance company and not something that may be openly advertised by your lender so you will need to make inquiries with your lender to see if this is an option that they will consider. If this type of car loan modification is something that you need, then you will also need to be aware of any penalties that may be applied to your loan before you take this option. Some lenders may be prepared to freeze your repayments, but will add the interest rate applied to this period onto your subsequent repayments. So, before choosing this method of car loan modification you will need to gain a good understanding of how it will effect your loan in the future.If you are struggling to make your repayments and are at risk of falling into arrears, it is a good idea to approach your lender as soon as possible. Finance companies are more willing to negotiate car loan modification for customers who have had a good repayment record than those who have a short history of making late payments.
Car modifications are loan modifications that help you better afford your monthly payment. If the idea of a loan modification scares you, then you’ll be relieved to know that many people go through this process and it helps them fix their credit and avoid repossession.Car modifications involve several steps. First, you have to be behind. Lenders don’t negotiate loan modifications with people who are making their payments on time. If you’re keeping up right now but you fear falling behind in the future, and currently your credit is good, you might choose refinancing or loan consolidation instead. Or if your car is worth more than you currently owe on it, you could simply sell it to pay off your loan and purchase a car that costs less with smaller payments.But if you are falling behind and you’re having financial difficulties in keeping up with your car payments, then you’re the perfect candidate for car modifications. Your credit doesn’t matter because it’s expected that when you’re in a hardship situation you’re going to have credit problems. If you try to refinance with poor credit, you either won’t get the refinancing loan or the interest rate will be higher than you expect making it not worth your time or money to do so.If you look for a car loan modification, your lender will want to see proof that you really are in a financial mess. If they can look at your financial records and see that you have plenty of money for the car payment but you’re squandering it away, they’re not going to want to grant the modification. They usually have a limit as to how much extra money is left over each month after all of your bills and living expenses.If you have more than that amount left according to their calculations, you may not qualify.
So before you look into a car loan modification, it’s important to really examine your finances and make sure you can’t simply find the money for the payment in the amount you already earn. The lender will be looking at this information very carefully, so you want to anticipate that and make sure you’ve left no stone unturned.Once you can prove that you are in a financial hardship, the terms of the loan can be renegotiated to lower the payment each month and even lower the interest rate so you pay less over time. These car modifications make it easier for you to make your payments on time. That means you’ll be accumulating less interest because you’re paying the loan down properly. And the modifications usually include a lower interest rate.Thanks to all of this, you’ll stop having late and missed payments show up on your credit report so that your credit score can start to go back up. It’s important that you make other payments on time to help with this process. You’ll also avoid a car repossession which could seriously damage your credit for up to seven years and make it harder to get another car loan.