Struggling to Pay Your Car Loan? How Hardship Programs Can Help

If you have lost your job, dealt with a medical emergency, or faced a large unexpected expense, keeping up with car payments can be difficult. Luckily, many lenders offer auto loan hardship programs to help you stay on track and avoid losing your vehicle.

Here is a simple guide to how these programs work and what steps you can take if you are struggling.
 

What is an Auto Loan Hardship Program?

A hardship program is a special arrangement between you and your lender. It is designed to provide temporary relief so you don’t "default" (stop paying entirely) on your loan. Depending on your situation, your lender might offer a few different solutions:
 

• Changing Your Due Date: If your car payment is due right when your rent or mortgage is also due, you can often move the date to a time of the month when you have more cash on hand.
• Loan Deferment (Skipping a Payment): This allows you to skip one or more payments and move them to the very end of your loan. For example, if your last payment was supposed to be in December, a two-month deferment would move that final payment to February. Note: You will still owe the money, and interest will continue to grow during those skipped months.
• Payment Plans: Your lender might let you make smaller payments or "interest-only" payments for a short time until you get back on your feet.
• Loan Modification: For long-term problems (like a permanent disability), a lender might permanently change the terms of your loan to make the monthly payments more affordable.

 

Major Lenders That Offer Help

Most big banks and lenders have programs in place. If you use one of these companies, you can call them directly to ask for help:
 

• Ally Bank: Offers payment skipping or loan changes. (888-925-2559)
• Capital One: Allows you to skip payments or change your due date. (800-946-0332)
• Chase: Offers payment extensions for eligible customers. (800-336-6675)
• Ford Credit / Toyota Financial: Most major car brand lenders have assistance programs if you call them.
• Wells Fargo: Provides due date changes and payment adjustments. (800-289-8004)

 

Other Options if You Can’t Afford Your Loan

If a hardship program isn't enough, consider these alternatives:
 

• Refinance: You may be able to get a new loan with a lower interest rate or a longer payoff time, which will lower your monthly bill.
• Sell or Trade in the Car: If your car is worth more than you owe, you can sell it and use the extra money to buy a cheaper vehicle.
• Voluntary Surrender: As a last resort, you can give the car back to the lender. While this hurts your credit score, it looks slightly better than a "repossession" where the bank has to come and take the car from you.

 

How This Affects Your Credit

Participating in a hardship program usually does not hurt your credit score, as long as you follow the new agreement and make your new payments on time.

However, if you wait until you are already several months late before calling your lender, those late payments will already have damaged your credit. It is always best to call your lender before you miss a payment.
 

Summary of What to Do Next

If you think you are going to miss a payment, take these steps immediately:
 

1. Call your lender. Most banks would rather help you pay than go through the hassle of taking your car.
2. Get it in writing. If they agree to let you skip a payment, make sure you get an email or letter confirming the new deal.
3. Keep paying what you can. Until your hardship application is officially approved, try your best to stay current on your payments.

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