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An auto loan hardship program can help you if you are facing a financial emergency and need help with your car payments.
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Eligibility criteria, fees and program options vary by lender.
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If you don’t qualify for an auto loan hardship program, there are other forms of debt relief.
No matter how prepared you are, a financial crisis (like a job loss or a medical emergency) could still catch you by surprise. The last thing you need is to worry about missing your auto loan payment or losing your vehicle because you can’t keep up with payments.
Fortunately, many lenders offer auto loan hardship programs to help you postpone or defer your payments for a few months. Not all lenders offer a hardship program and it may mean paying more for your loan overall, but it can provide some relief during a crisis.
“Usually, auto loan hardship programs still get someone to make half a payment. So if your payment was $400 and you paid $200, which all goes toward interest because it’s usually overdue, (your lender) will agree to reset the next due date and extend the due date,” says Thomas Holgate, president of Lobel Financial. “Therefore, your 72-month loan can be converted to a 76-month loan.”
If you need financial hardship relief, the best thing you can do is contact your lender as soon as possible to explain what is happening and what you need. Ideally, you’ll do this before your first late payment so you have time to figure something out before you fall behind. But even if you’re already behind, it doesn’t hurt to reach out and ask about your options.
There are several things to consider when choosing a program, including fees and additional interest. As an example, VyStar Credit Union charges current customers a monthly fee of $15 (up to three months) to take advantage of the option to skip a payment. However, not all lenders charge a fee, so ask about potential costs ahead of time.
I would avoid lenders that try to charge a lot of fees up front. Many lenders will try to get everything they can out of you at that time, so beware of a lot of processing and payment fees. (Try) to find a company that may stop the interest from accruing during a period of hardship so that you don’t end up with hundreds of dollars in interest that may take months to pay back.
If you decide to follow your lender’s hardship program, the terms of the agreement are binding unless you choose to refinance later.
Modified payment date
Some lenders will allow you to change your payment due date. This can help if you frequently pay late because the due date occurs before you get paid.
Postponement or forbearance
This option allows you to temporarily skip or pause your payments. Typically, interest will continue to accrue during this period. You could pay more over the life of the loan.
Interest-only payments
Another option is to pay only the interest until your finances return to normal.
Reduced interest rate or monthly payments.
You may get a lower interest rate and smaller monthly payments through auto refinancing. Refinancing may mean a longer repayment term, resulting in more interest accruing. However, smaller payments can prevent you from defaulting.
New payment plan
You may be able to request a payment extension or establish a new plan with your lender to catch up on missed payments. The downside is that you’ll still have to make regular payments while keeping your balance up to date.
The details vary by program, but these are some of the most common options when seeking relief on your auto loan payment.
Financial difficulties can be stressful, especially when your budget is already limited. Many lenders offer relief options to help borrowers get through difficult periods, but the level of support can vary. Some lenders may have limited or no programs available.
Even those that offer hardship programs will have individual options, terms, and requirements. Carefully review your options to see which one best suits your needs. If your current lender doesn’t offer relief, you may need to turn to another that does by refinancing your auto loan.
These lenders provide some type of relief in case of hardship:
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Alliant Credit Union: The Consumer Loan Modification program offers you a lower interest rate and a payment of up to six months. The Payment Program reduces your interest rate and the amount of your monthly payment for a set period until you pay off the remainder of your loan. You may be required to complete an application and provide proof of income.
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CarMax: With CarMax, you can get a payment extension or a custom payment date.
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Carvana: Through Bridgecrest, Carvana’s third-party loan servicer, you may be able to skip a single month’s payment. Your loan will continue to accrue interest during this time. The missed payment will be added to the end of your loan.
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Light current: Through Truist, you can apply for an auto loan modification with LightStream for a potentially reduced rate, a payment term extension, a different type of loan, or a combination of all three.
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PenFed: PenFed allows you to skip one payment per 12-month period. You may also be able to request an extended loan term.
Each lender has different requirements. Some programs require proof of income to qualify for hardship assistance, while other lenders may only offer relief to current customers. Borrowers with a strong payment history are more likely to qualify, so it’s important to contact your lender before you fall behind on payments. Here’s how to get started:
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Do your homework. Before enrolling in a hardship relief program, check what your lender offers. Depending on the hardship relief program, you may also need to meet minimum income, credit score, or debt-to-income (DTI) ratio requirements.
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Request assistance. You can usually apply for hardship relief on the lender’s website or by phone. Be prepared to provide supporting documentation if requested.
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Receive a decision. Someone on the lender’s side will review your application and, if necessary, request additional information or documentation. The schedule varies, so be prepared to continue making payments.
The exact process will depend on the lender servicing your auto loan. Contact your customer service team to find out what you’ll need to do or request financial hardship assistance.
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Documentation requirements
You may be required to provide certain information and documentation verifying your situation during the application process. This may include:
Loan details such as remaining balance, interest rate, and APR.
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Remaining balance
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Current interest rate and APR
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Payment history
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Make, model, year, mileage and condition of the vehicle.
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Proof of income or termination letter from your employer
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Personal identification
Auto loan hardship programs can be helpful, but they are not right for everyone. You may find that you don’t qualify for the one you need. Or you may find that the cost is too high.
Whatever the case, here are some other options for auto loan debt relief:
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Ask for help: Consider asking a close friend or family member for financial help on a short-term basis. Make sure you pay back the money you borrowed as promised.
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Examine cancellation or suspension of debt: This may be an option if the vehicle owner is unemployed, has a qualifying disability, has experienced financial hardship, or has died.
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Find Other Hardship Relief Programs: If you are falling behind on your daily expenses, certain public or nonprofit organizations may be able to help you.
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Redo your budget: If you’re having trouble making payments, review your budget. Cut back what you can and put that money toward your car payment instead.
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Refinance with a guarantee: Having a cosigner on your auto loan can help you get better rates and terms when you refinance, which could help you lower your monthly payment.
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Sell ​​or lower your car: If your current car costs too much, it might make sense to sell it or trade it in for a cheaper model. Check your car’s value and do the math to make sure it’s worth it.
With car repossessions on the rise, more drivers are looking for a solution. “Today, lenders are much more focused on helping customers keep their vehicles than trying to repossess them, and many are willing to offer hardship programs to borrowers experiencing temporary financial difficulties,” Holgate says. “The key is open communication: When customers stay engaged, lenders can usually structure solutions that overcome short-term challenges and keep them on track.”
Many lenders offer auto loan hardship programs to help borrowers manage their monthly payments while facing a financial emergency. Options include smaller monthly payments, a reduced interest rate, payment deferral and payment extension plans. Each lender has its own requirements.
If you don’t qualify for a hardship program, you may be able to find relief in other ways, such as auto loan refinancing or debt relief. Consider your options carefully before choosing one, but don’t delay too long. Notify your lender of your situation as soon as possible to avoid late payment fees, damaged credit, or other long-term consequences.
