Discover how auto loan hardship programs work and find out which lenders offer them. Learn how to qualify for assistance and the key points to keep in mind.

Questions Answered in this Article

1. What is an auto loan hardship program?

• An auto loan hardship program is a relief option offered by some lenders to assist borrowers who are struggling to make payments on their car loans due to financial difficulties.

2. Why do lenders offer hardship programs?

• Lenders are incentivized to offer hardship programs, as they increase the likelihood that borrowers will be able to continue making payments on their loans and avoid default.

3. What are some examples of lenders that offer assistance to consumers experiencing short-term financial difficulties?

• Some examples of major lenders that offer assistance to consumers experiencing short-term financial difficulties include Alliant Credit Union, Ally Auto Refinance, Carmax, Carvana, Chase, Digital Federal Credit Union, and PenFed Credit Union.

4. How do you qualify for a hardship program?

• Qualifying for a hardship program will depend on the specific circumstances of your situation. To receive assistance, you must apply and be approved, even if you meet the lender’s hardship program requirements. The application process varies by lender but typically involves contacting your lender to discuss your eligibility or beginning an application through their website.

5. What are some key points to keep in mind when enrolling in a hardship program?

• It’s crucial to be transparent with your lender about your ability to repay a loan before enrolling in a hardship program. Borrowers should be honest with their lenders to identify the best program option based on their situation. Before signing up, fully understand the program terms and only agree to affordable terms.

Auto Loan Hardship Programs: Assistance for Borrowers Struggling to Make Payments

If you’re facing financial challenges or unexpected situations that make it difficult to keep up with your monthly bills, including your car payment, there may be a solution. Some lenders offer hardship programs for auto loans that can provide support to individuals who are struggling to make payments.

These hardships may stem from a variety of factors, such as losing a job, experiencing a medical emergency, or other financial burdens. The assistance available through these programs can vary but may include options such as deferment or forbearance (allowing you to pause or skip payments), extended loan terms, reduced interest rates, and more. These options can help you avoid defaulting on your car loan and potentially alleviate some of the stress associated with financial difficulties.

Auto Loan Hardship Program

An auto loan hardship program is a relief option offered by some lenders to assist borrowers who are struggling to make payments on their car loans due to financial difficulties, such as losing a job, experiencing a medical emergency, or facing other unforeseen circumstances.

In 2022, there was a significant increase in auto loan delinquencies among borrowers in their 20s and 30s, with a return to pre-pandemic levels, according to data from the Federal Reserve Board of New York. Despite the expiration of other relief options, auto loan hardship programs remain available to provide borrowers with some relief and help them avoid negative consequences like late fees, penalties, and repossession in extreme cases.

Lenders are also incentivized to offer these programs, as they increase the likelihood that borrowers will be able to continue making payments on their loans and avoid default. By participating in hardship programs, borrowers can benefit from options like deferring or pausing payments, extending loan terms, or reducing interest rates, all of which can help alleviate the financial strain of meeting their monthly obligations.

It’s worth noting that not all lenders provide hardship programs, and even those that do may have varying terms and conditions depending on the institution. Here are some examples of major lenders that offer assistance to consumers experiencing short-term financial difficulties:

• Alliant Credit Union provides its Skip-a-Due-Date program, allowing members to skip one monthly payment, along with other assistance programs that offer reduced interest rates and payments for eligible consumers.
• Ally Auto Refinance offers payment plans, due date changes, extensions, and modifications to help consumers facing financial hardships such as unexpected expenses, income changes, or other family or household circumstances.
• Carmax offers payment accommodations, such as due date changes or payment extensions, to those experiencing short-term hardships, including a change in employment status, an unforeseen medical situation, adverse impacts from a natural disaster, and more.
• Carvana can help struggling borrowers by providing skipped payments and extended loan terms.
• Chase offers payment extensions and the option to change payment due dates for those who are having difficulty making payments on time.
• Digital Federal Credit Union assists with skipped payments, extended loan terms, reduced interest rates, and other recovery programs.
• PenFed Credit Union offers skipped payments and extended loan terms to qualifying consumers.

Qualifying for an Auto Loan Hardship Program

Qualifying for a hardship program will depend on the specific circumstances of your situation. Some lenders, like LightStream, evaluate hardship payment assistance on a case-by-case basis, while others, such as Chase, assess each consumer’s ability to pay with the help of an advisor.

To receive assistance, you must apply and be approved, even if you meet the lender’s hardship program requirements. The application process varies by lender but typically involves contacting your lender to discuss your eligibility or beginning an application through their website.

During the application process, you may need to provide documentation to prove your hardship, such as proof of income, recent pay stubs, bank statements, proof of unemployment, and the ability to repay.

After you apply for a hardship program, your lender will review your application and may request additional documentation before approving or denying your request for assistance. If approved, they will discuss the type of assistance that can be provided. This process can take up to 30 days, during which time you are still responsible for making payments that are due.

Key Points to Keep in Mind

It’s crucial to be transparent with your lender about your ability to repay a loan before enrolling in a hardship program. Borrowers should be honest with their lenders to identify the best program option based on their situation. Before signing up, fully understand the program terms and only agree to affordable terms.

If you’re struggling with your car payments, reach out to your lender as soon as possible and explain your situation. It’s best to do this before you fall behind on payments.

In case your lender doesn’t offer a hardship program or you prefer alternative solutions, there are steps you can take. For instance, you could explore refinancing options, selling the car, or seeking credit counseling. It’s important to weigh your options carefully and choose the best course of action for your circumstances.

Summary

• Auto loan hardship programs provide support to individuals who are struggling to make payments due to financial difficulties.
• These programs may include options such as deferment or forbearance, extended loan terms, reduced interest rates, and more.
• Auto loan delinquencies among borrowers in their 20s and 30s increased in 2022, but auto loan hardship programs remain available to provide relief.
• Lenders are incentivized to offer hardship programs as they increase the likelihood that borrowers will continue making payments and avoid default.
• Major lenders such as Alliant Credit Union, Ally Auto Refinance, Carmax, Carvana, Chase, Digital Federal Credit Union, and PenFed Credit Union offer hardship programs to eligible consumers.
• Qualifying for a hardship program depends on the specific circumstances of your situation and involves an application process that varies by lender.
• It’s crucial to be transparent with your lender about your ability to repay a loan before enrolling in a hardship program.
• Borrowers should explore alternative solutions such as refinancing, selling the car, or seeking credit counseling if their lender doesn’t offer a hardship program or if they prefer other options.