Auto loan hardship programs explained
An auto loan hardship program is an arrangement between a borrower and lender that temporarily changes repayment requirements due to financial difficulties. Auto loan hardship programs may let you defer or reduce payments, waive certain fees, adjust payment due dates or restructure the loan.
Note that these arrangements aren't guaranteed. Lenders typically evaluate your financial situation and determine which options, if any, they can offer.
Who offers hardship assistance
Banks, credit unions and financing companies connected to automakers may offer hardship assistance, but the available options will vary depending on your lender. If you're worried about missing a payment, reach out to your lender as soon as possible.
“Contacting your lender before you fall significantly behind is your best bet,” Claudia Stepp, vice president of consumer lending for Apple Federal Credit Union, advised. “There are often more options while your account is in good standing.”
Typical eligibility requirements
Most lenders will want evidence that you're experiencing financial hardship, whether that’s because of a job loss, reduced income, medical expenses or unexpected household emergencies.
To show proof of your financial situation, you may have to provide:
- Recent pay stubs or bank statements
- A hardship letter explaining your financial situation
- Information about monthly expenses and outstanding debts
- Authorization to review your credit history
How interest and fees change
Most hardship assistance programs won’t eliminate your interest charges. In other words, your interest may continue accruing during a payment pause and increase the amount you’ll ultimately have to repay.
Also, even though some lenders can reduce or eliminate your penalties, others may charge account modification or extension administrative fees, depending on their policies. So, before accepting an offer, ask your lender for an estimate of your total repayment costs.
How approvals affect your credit
Getting approved for a hardship program won’t immediately drop your credit score as long as your lender reports your payments as current under the new arrangement.
However, any missed payments before the agreement may still appear on your credit report. To avoid surprises, ask your lender how it will affect your credit and get the agreement in writing.
Auto loan payment deferral and forbearance
Auto loan payment deferral and forbearance can temporarily suspend or reduce your monthly payments when you’re going through a financial rough patch. While lenders may use the terms “deferral” and “forbearance” interchangeably, they aren’t exactly the same.
A deferral moves one or more payments to a later date, whereas forbearance may let you temporarily skip payments or pay a reduced monthly bill.
How deferred payments are repaid
Deferred payments don't make bills disappear forever. Rather, your lender may add them to the end of your loan, extend the repayment schedule or require another repayment arrangement.
Here’s an example of how it works: Let’s say your monthly car payment costs $400 and your lender lets you defer two payments. In this case, you'd still owe $800. Also know that when you defer payments, it could potentially increase the total amount of interest you pay since your outstanding loan balance remains unpaid longer.
Restrictions and documentation
The number of times you can defer a car payment depends on your lender and its policy. Some may also not allow you to get an extension if you’re behind on your payments. Contact your lender to understand its specific requirements.
In some cases, lenders may ask for a formal hardship letter explaining why you can’t make your car payment. Make sure to be honest about your financial situation and explain how long you expect your hardship to last. You can also ask your lender if it has a specific hardship application or letter template you can use.
Auto loan modification and repayment plans
Auto loan modifications change your existing loan terms to make your payments easier to manage. Depending on your lender, modifications could adjust your payment due dates, extend the loan term or work out a new repayment schedule.
If you expect your financial difficulties to last more than a few months, these options can be a better fit than a short-term payment deferral.
Changing your payment due date
If your payment due date no longer aligns with your financial schedule because your pay cycle changed or for other reasons, many auto loan lenders let you adjust your payment due date after your loan begins. That said, every lender has its own rules and eligibility requirements, so the flexibility you have depends on your lender’s policies.
Also, changing your payment due date won’t reduce the total amount you owe, and it might also affect the way your interest charges are calculated. So check with your lender to see if there are any extra fees or interest charges before making any changes.
Extending your loan
Extending your term can lower monthly payments by spreading the debt over a longer time frame, but it will also increase the total interest you pay over the life of the loan.
For example, if you take out a $20,000 loan at 4.75% interest, you’ll pay around $375 every month over 60 months. If you extend the term to 72 months, your payment drops to around $320, but your total interest increases from $2,508 to $3,024.
Fee relief
Some lenders may also waive late fees, annual fees or default charges if you’re able to demonstrate financial hardship. If you’re struggling to keep up with your monthly payments, reach out to your creditors to see if they can waive these fees for a set period.
Auto loan alternatives to hardship programs
If a hardship program doesn’t offer the relief you need, check out these other options that may better help you manage the outstanding debt.
Hardship programs aren’t the only way to manage an unaffordable car loan. You may also be able to lower your monthly car payments by refinancing, trading down to a cheaper vehicle or selling the car. And if you don’t expect your financial situation to get better soon, voluntary surrender or consulting a bankruptcy attorney can be a last resort. See the chart for more.
| Option | When it helps | Key requirements | Credit impact | Cost tradeoffs |
|---|---|---|---|---|
| Refinance | You qualify for a lower rate or payment | Sufficient credit, income and vehicle equity | Hard inquiry | Longer terms may increase interest |
| Sell the car | You can manage without the vehicle | Enough proceeds or cash to pay off the loan | Generally no direct negative impact if paid as agreed | Eliminates your monthly payments, but you no longer own the car |
| Trade down | A cheaper car meets your needs | Affordable replacement and manageable equity | New financing may affect credit | May reduce your payments but you’ll pay extra transaction costs |
| Voluntary surrender | You can’t maintain payments or keep the car | Coordinate return with lender | Could seriously affect your score | May reduce recovery costs but leaves potential debt |
| Bankruptcy consultation | Multiple debts are unaffordable | Financial records and legal evaluation | Consultations alone won’t have an impact on your credit score | Legal fees and potential credit consequences if filing |
FAQ
How long can you defer a car payment?
Most car payment deferrals last one to three months, depending on your lender. Remember, even if you can defer your car payments, interest can continue to accumulate during that period.
What are reasons to defer a car payment?
Some reasons to defer a car payment can include job loss, a temporary drop in your income or an unexpected cost that makes you unable to afford your payments. Note that lenders typically require proof of temporary financial hardship.
Is emergency car payment assistance available?
Yes, emergency car payment assistance is available. Many lenders offer emergency assistance through payment deferrals, extensions or hardship programs.
How do I get out of a car loan I can't afford?
To get out of a car loan you can’t afford, you can refinance your loan, sell your vehicle or trade it in for a cheaper car. If those options aren't possible, you may want to request hardship assistance or voluntarily surrender the vehicle.
Can you go to jail for not paying a car loan?
No, you won’t go to jail simply for not paying a car loan, but your lender may repossess your vehicle, report missed payments or sue you for unpaid debt.
Article sources
ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
- Fitch Ratings, "U.S. and Canadian Prime Auto Loan ABS Resilient; Subprime More Vulnerable." Accessed Oct. 19, 2026.
