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.
