Some lenders provide assistance, such as payment plans or deferments, to customers who are having difficulty making their monthly auto payments.

Financial pressures or unanticipated situations might make meeting monthly financial commitments difficult. If you're in this situation and your car payment is one of the things giving you concern, there may be a way out. Several lenders provide vehicle loan hardship programmes to help customers who are having difficulty making payments.

Job loss, a medical emergency, or other financial difficulties are examples of hardships. And the aid these programmes provide includes payment deferral or forbearance (skipping or halting payments), extended loan terms, lower interest rates, and more – all of which may help you avoid defaulting on your auto loan.

What Exactly Is A Car Loan Hardship Programme?

With the termination of various coronavirus-related aid and benefits programmes in 2022, there was a significant increase in vehicle loan delinquencies. And it was especially noticeable among individuals in their twenties and thirties: According to Federal Reserve Bank of New York data, the fraction of these borrowers who have fallen 90 days behind on their vehicle loans has returned to pre-pandemic levels, climbing to 2.22% percent in the fourth quarter of 2022 – a more than 37% rise from the same period in 2021.

While other forms of assistance may have ceased to exist, vehicle loan hardship programmes remain available. These programmes can provide borrowers with some breathing room and help them avoid the repercussions of missing auto payments, which include a negative impact on their credit score, late fees and penalties, and, in severe situations, repossession.

According to Amy L. Godard, director of loan servicing at Digital Federal Credit Union, lenders are encouraged to provide such services because they may collect what they're due before a customer default on a loan.

"[Hardship programmes] improve the probability that the borrower will be able to continue making loan payments and avoid repossession," she explains.

It should be noted that not all lenders provide hardship programmes. Those who do differ in terms and circumstances depending on the institution. Some large lenders, for example, provide support to clients who are having short-term difficulties:

• Alliant Credit Union provides its Skip-a-Due-Date programme, which allows members to miss one monthly payment, as well as other assistance programmes that give qualifying clients with lower interest rates and payments.
• Ally Car Refinancing provides payment plans, due date adjustments, extensions, and modifications to help customers who are experiencing financial difficulties due to unforeseen costs, income fluctuations, or other family or household situations.
• For people enduring short-term problems such as a change in job status, an unexpected medical crisis, bad effects from a natural disaster, and more, CarMax offers payment accommodations in the form of a due date adjustment or payment extensions.

• Carvana may assist individuals in need by giving missed payments and extended loan periods.
• For people who are having difficulty making payments on time, Chase offers payment extensions and the flexibility to adjust payment due dates.
• Among other recovery initiatives, Digital Federal Credit Union offers missed payments, longer loan periods, and lower interest rates.
• PenFed Credit Union allows qualified customers to skip payments and extend loan terms.

How To Be Eligible For A Hardship Program

The sort of help provided by a lender's hardship programme will also be determined by the consumer's individual situation. Light Stream, for example, evaluates hardship payment assistance on an individual basis. Similarly, Chase affirmed that a counsellor will assess each consumer's ability to pay.

Even if you feel you fulfil the standards of your lender's hardship programme, you must still apply and be accepted to get help. The enrollment procedure varies, but in general, you'll need to phone your lender to discuss your eligibility or initiate an application through your lender's website.

Throughout the application process, you may be required to provide additional paperwork to demonstrate your hardship, such as proof of income, most recent pay stubs, bank statements, proof of unemployment, and capacity to repay.

Once you apply for a hardship programme, your application will be examined, and a representative from your lender will contact you to seek further paperwork if necessary, to accept or deny your application, and to explain the type of help that can be offered if granted.

All of this can take up to 30 days, during which time you are still responsible for any outstanding payments.

Important Considerations

Hardship programmes might assist you reduce your financial load and prevent default or repossession. But, there are a few things to consider before deciding on one.

When participating in a programme, Godard recommends clients to be honest with their lender about their capacity to repay a loan.

"Hardship programmes often need the ability to repay upon programme completion," she notes. "As a result, it's critical that a borrower be honest with their lender about their abilities so that they can determine which programme would be the greatest option depending on their position."

This also emphasises the need of thoroughly understanding the programme terms before enrolling in one, and only agreeing to terms you can afford.

If you're having trouble paying your monthly auto payments, the first and most crucial step is to contact your lender as soon as possible to explain your situation, ideally before you fall behind.

There are some alternatives you may take before enrolling in a hardship programme or if your lender does not provide such assistance:

• Find out ways to reduce your auto payment.
• Refinance your vehicle loan.
• Sell or sell in your automobile and choose a vehicle with cheaper monthly payments.
• Set up automatic payments as soon as you acquire a loan so you don't miss a payment.
• Understand your loan conditions, payment alternatives, and how much you can afford to pay before committing to a vehicle loan.