How to Reduce Car Payments Without Refinancing Your Car Loan

If you don't have good enough credit to refinance a car loan, auto loan modification is a good option. Contact your lender for options on lowering payments and interest.
Written by Rochelle Miller-Hernandez
Reviewed by Carrie Adkins
Car loan modification is another option for lowering your car's interest rate and payments if you can't refinance your car.
It's not unusual to encounter financial hardship and struggle while paying off your car loan. If you find yourself in this position, you'll want to
lower your car payments
You may find that refinancing your loan isn't an option if you don't have a solid credit score. If you're wondering how to lower auto loan interest rates without refinancing,
's got you covered.
Compare auto insurance policies
No spam or unwanted phone calls · No long forms · No fees, ever

What is car and auto loan modification?

Auto loan modification may seem similar to
refinancing a car
, but they are not the same thing.
When you are refinancing, you have to reapply for a new loan. You will have to qualify for credit, just as you did for the original loan. With car loan modification, you are asking your lender to modify and lower the payments on your existing loan.
You're not applying for new credit. Instead, you are claiming you have financial hardship that is making it impossible to meet your financial commitments.
A lender can lower car payments through modification by reducing the current interest rate or extending the loan term so you can make more payments at a reduced monthly amount.
Key Takeaway: Unlike refinancing, loan modification is a reduction of your current payments because of financial issues, and not a new loan. It could result in lower interest rates or extended loan terms.

How to lower car payment without refinancing

Before applying for car loan modification, you need to decide if it is the right option for you.
Not everyone is eligible for modification. You must prove financial hardship. If you think you will miss enough payments that your lender will repossess your car, you should consider modification. If you are out of work due to a layoff or an illness, you should explore this option as well.
However, if your credit is in good condition and you think you can qualify for a
refinanced car loan
, that might be the route you want to pursue.

Applying for auto loan modification

You should start with meeting with your lender. Explain your situation and discuss your options.
Not all lenders offer loan modification and will only reduce car payments through a refinancing loan. Sometimes a lender will defer your payments if your financial hardship is only temporary. Whatever they suggest, keep them in the loop.
If they know you truly want to pay off your loan and are not trying to get out of your commitment, they are more likely to help you find a solution that works for the both of you.

Gather documentation

You will have to provide proof of hardship in order to qualify for auto loan modification.
Just like applying for a new loan or refinancing loan, you will have to provide documents supporting your claim. Documents you may be asked to submit include pay stubs,
proof of employment
, proof of injury, proof of unemployment, bank statements, a list of current bills, and other income sources.

Prepare a hardship letter and submit your request

You will have to compose a statement explaining why you should receive loan modification.
hardship letter
is your formal request for car loan modification. Not all lenders, judges, and jurisdictions require it, but it's a good idea to have one prepared.
In your letter, you will need to explain why making your car payment is difficult, detail any special circumstances reducing your income level, and outline any situations that might be increasing your overall bills.
Job loss is an example of income reduction, while medical expenses due to an accident can be proof of an increase in bills. You will also need to provide an explanation of what you can afford, the new terms you are seeking, and anything else you think will be helpful to make your case.
You should add in your letter that you intent to pay the loan in full. Once you have everything put together, you will submit your request. Remember, you still need to make payments while you are waiting for a decision.
Key Takeaway: Write and submit a hardship letter stating your new financial difficulties, the adjusted terms you want, and that you still plan to pay the full loan. And don't forget to keep paying your loan while you wait for a response.

Accept or decline the lender’s modification terms

Review all your options before making a final decision.
Keep in mind that you may have to make your request for a loan modification more than once before it is finally approved.
This process can be very time consuming and will not happen overnight. You do not have to accept any terms you do not like, so bear in mind that you may have to contact and negotiate with your lender multiple times.
No matter your lender’s decision, always respond to accept or decline. If you decline the offer, explain why so they can review the terms and come up with a mutually satisfying solution. Before accepting the new terms, make sure the modification will help ease your financial hardship enough to make a considerable difference.
Even after you try to reduce your car payments without getting a refinancing loan, you may find that getting a new loan is your best option after all. However, before making the final decision on which route to take, make sure you understand how loan modification works, how to decide if it is the right option for you, and the process for applying for car loan modification.
Key Takeaway: Respond with either a 'yes' or a 'no' (with an explanation) to all of your loaner's offers, and keep in mind that you may go through multiple offers before getting better terms. In the end, a new loan might still be better for you, so check your options thoroughly.
After careful evaluation, if you decide a car refinancing loan is the best choice, this helpful
guide for refinancing
can lead you through the process.


Where can I get cheap car insurance?

Whether your vehicle is entirely paid off or if you've only just put your down payment in, you can't go anywhere without excellent car insurance. For the best deal, try
If you want to save money on car insurance, the Jerry app is a good place to start. A licensed broker, Jerry does all the hard work of finding the cheapest quotes from the top name-brand insurance companies and buying new car insurance. Jerry will even help you cancel your old policy.
Haven’t shopped for insurance in the last six months? There might be hundreds $$$ in savings waiting for you.
Judith switched to Progressive
icon savingsSaved $725 annually
Alexander switched to Travelers
icon savingsSaved $834 annually
Annie switched to Nationwide
icon savingsSaved $668 annually
Compare Car Insurance Quotes For Free
Jerry automatically shops for your insurance before every renewal. Members save $872/year.
rating primary
Rating on App Store
Start saving money!
12,000+ Reviews
Trusted by 3.5M car owners like you

You might also be interested

Easiest way to compare and buy car insurance

No long forms
No spam or unwanted phone calls
Quotes from top insurance companies
Find insurance savings — it's 100% free