When a car payment becomes unmanageable, your options depend on how far behind you are and what your lender will accept
If you cannot make a car payment this month, contact your lender before the payment is due. Most lenders have programs for people in temporary hardship — they are not trying to repossess your car, they are trying to get paid. The conversation you have now determines whether you can modify your loan, defer a payment, or refinance at better terms. Waiting until you are 30 days late makes every option harder.
The specific steps depend on your situation: whether you have missed payments already, whether you own the car outright or still owe money, and whether your income problem is temporary or ongoing. This guide walks you through what each lender typically offers and how to ask for it.
Key Takeaways
- Call your lender as soon as you know you cannot make a payment — before the due date if possible — because lenders have hardship programs that disappear once you are late.
- Most lenders can defer one payment (push it to the end of your loan), reduce your monthly payment temporarily, or modify your loan terms permanently.
- If you are already 30 or more days late, your options narrow to loan modification or refinancing, and your credit report will show the late payment regardless.
- Refinancing through a different lender can lower your monthly payment if your credit is still decent, but it extends the loan and costs more interest overall.
- If you cannot afford the car at any payment level, selling it or returning it to the lender stops the debt but damages your credit and may leave you owing money.
Contact your lender before you miss a payment
Your lender's customer service line has a hardship department or financial hardship team. When you call, tell them you are having trouble making your next payment and ask what options are available. Do not wait for a late notice. Lenders distinguish between someone who calls ahead and someone who misses a payment and then calls, and the distinction affects what they will offer.
Have your loan number and account information ready. Be honest about why you cannot pay — job loss, medical emergency, reduced hours, unexpected expense. Lenders hear these reasons constantly and have programs built for them. They will ask how long the hardship will last and whether you expect your income to recover. If you say "I do not know," they may offer only a one-time deferment. If you say "I should be back to normal in three months," they may defer multiple payments or reduce your payment for that period.
Write down the name of the person you speak with, the date and time of the call, and exactly what they offered. If they say they will send you paperwork, ask when to expect it and what to do if it does not arrive. If they say you are not may be able to access for anything, ask to speak with a supervisor — the first person you reach may not know all the programs available.
Payment deferment: pushing one or more payments to the end of your loan
A deferment lets you skip one or more payments now and add them to the end of your loan. You still owe the money, but you do not have to pay it this month. Most lenders allow one deferment per year, though some allow two. The catch is that interest keeps accruing on the deferred amount, so you pay slightly more overall.
Deferment is the fastest option — many lenders can approve it over the phone or within a few days. It does not hurt your credit if you have not missed a payment yet. It is best for people whose hardship is genuinely temporary: you lost a week of work but expect to be back to full hours next month, or you had an unexpected medical bill but your income is stable otherwise.
Ask your lender how many payments you can defer and whether they will all move to the end or whether some will be due later in the year. Some lenders require you to resume regular payments after the deferment period ends, while others let you skip multiple months in a row if you ask in advance.
Loan modification: changing your payment or loan term
A loan modification changes the terms of your existing loan — usually by lowering your monthly payment, extending the loan term, or both. Unlike deferment, modification is permanent. If your lender modifies your loan to lower your payment from $450 to $350 per month, that is your new payment for the rest of the loan.
Modification typically requires paperwork showing your income and expenses. Your lender wants to see that you can actually afford the new payment. They will ask for recent pay stubs, a list of your monthly bills, and sometimes a letter explaining your situation. The process usually takes two to four weeks.
The trade-off is that extending your loan term means you pay more interest over time. If you have four years left on your loan and the lender extends it to six years, your monthly payment drops but you pay interest for two extra years. Modification makes sense if your income has permanently decreased or if you are juggling multiple debts and need breathing room. It does not make sense if your hardship is temporary and you expect to be able to afford your original payment again soon.
Refinancing through a different lender
If your current lender will not work with you, or if you want a lower payment and your credit is still in decent shape, you can refinance through a bank, credit union, or online lender. Refinancing means taking out a new loan to pay off your old one. The new lender pays your current lender in full, and you owe the new lender instead.
Refinancing can lower your monthly payment if the new lender offers a lower interest rate or if you extend the loan term. It can also help if you are behind on payments — some lenders will refinance even if you have missed one or two payments, though they will charge a higher interest rate. The downside is that refinancing costs money (process fees, title transfer fees) and resets your loan clock, so you pay interest for longer.
To refinance, contact banks and credit unions in your area, or search online for auto refinance lenders. You will need your current loan information, proof of income, and proof of insurance. The new lender will pull your credit report. If you have missed payments, expect a higher interest rate than you would have gotten before the miss. Compare offers from at least three lenders before choosing one — the difference in interest rate can save or cost you hundreds of dollars.
What happens if you are already 30 days late
Once you miss a payment by 30 days, your lender reports it to the credit bureaus and your credit score drops. At this point, deferment is usually off the table. Your options narrow to loan modification or refinancing, and both are harder because your credit is now damaged.
Your lender may still modify your loan, but they will require more documentation and may charge a modification fee. Refinancing becomes possible only if you find a lender willing to take on a borrower with a recent late payment — which usually means a higher interest rate than you had before. Some lenders specialize in refinancing people with recent late payments, but their rates are steep.
If you are 60 days late, your lender may begin repossession proceedings. This varies by state and by lender — some move faster than others. If your car is repossessed, you lose the vehicle and still owe the difference between what the lender sells it for and what you owe on the loan (called the deficiency). That deficiency can be pursued as a debt, and it will appear on your credit report for seven years.
Selling the car or returning it to the lender
If you cannot afford the car at any payment level, you have two options: sell it yourself or return it to the lender (called voluntary surrender).
Selling the car works only if you owe less than the car is worth. Use a site like Kelley Blue Book or NADA Guides to find the current market value. If you owe $8,000 and the car is worth $10,000, you can sell it privately, pay off the loan, and keep the difference. If you owe $10,000 and the car is worth $8,000, you are underwater — you would have to pay $2,000 out of pocket to sell it, which defeats the purpose.
Voluntary surrender means returning the car to the lender and walking away. You lose the car and avoid repossession, but you still owe any deficiency between the sale price and your loan balance. The lender will report the surrender to the credit bureaus, and it will damage your credit for seven years. You may also face a deficiency judgment if your state allows it, which means the lender can pursue you for the remaining debt.
Both options are last resorts — they damage your credit and may leave you owing money. But both are better than ignoring the problem and waiting for repossession, which happens without your input and costs you the car plus the deficiency plus repossession fees.
Frequently Asked Questions
Will asking for help hurt my credit?
Asking for deferment or modification before you miss a payment does not hurt your credit — the lender does not report it to the credit bureaus. Once you miss a payment by 30 days, the damage is done regardless of whether you ask for help. So calling early is always better than waiting.
What if my lender says no to everything?
If your current lender will not work with you, refinancing through a different lender is your next step. Some lenders specialize in people in hardship. You can also contact a nonprofit credit counselor through the National Foundation for Credit Counseling — they offer free or low-cost information on negotiating with lenders and may be able to contact your lender on your behalf.
Can I get my payment lowered permanently?
Yes, through loan modification. Your lender will lower your monthly payment if you show that your income has decreased and you cannot afford the original payment. The trade-off is that your loan term extends, so you pay more interest overall. Ask your lender to show you the total interest you will pay under the modified terms so you can decide if it is worth it.
What happens to my car insurance if I return the car?
You should cancel your auto insurance once the car is no longer in your possession. Contact your insurance company and tell them you are returning or selling the vehicle. They will cancel your policy and may refund any unused premium. If you financed the car, your lender required you to carry full coverage — once the car is gone, that requirement ends.
How long does loan modification take?
Most lenders complete modification within two to four weeks, though some take longer if they need additional documentation. During this time, continue making your regular payment if you can, or ask your lender whether to hold off. Once modification is approved, your new payment terms take effect when ready.