Car loans can be a major monthly expense for millions of Americans. New cars are appealing, and the general trend is to pay less up front and more on the back end--with big monthly payments. In some cases, cars cannot be refinanced--due to high mileage, age, condition or a combination of the three. In these cases, lowering your payment is considerably harder. There is one way to reduce your monthly payment without refinancing: a private debt restructure.
Establish a solid reason for a restructure. Usually lenders only grant these types of programs, often called "hardship" loans, if you are in serious danger of defaulting on the loan. Such reasons include: medical emergency, loss of employment and bankruptcy.
Calculate your own debt to income (DIR) ratio. A high DIR will cause you to struggle to make payments. Divide all of your monthly expenses by your gross monthly income. For example, if you have $1,000 in expenses each month (including a car payment), and $2,000 in gross income, your DIR is 50 percent--what lenders consider relatively high.
Determine your current interest rate on your car loan and figure out what would be a more manageable interest rate. Bankrate has an auto payment calculator that you can use to figure this out. It's important to have a clear request before asking for a rate modification.
Contact your lender and ask for a hardship plan. Be sure to provide all documentation to support your claims--income documents, bank statements--and prepare to lose the first round of negotiations. You may need to get a person in a supervisory position involved.
Make sure to get the hardship plan in writing before agreeing to it and signing it. Make sure the terms will help your current financial situation.
Prepare to rework your personal budget and spending--especially if the hardship program you get approved is only temporary. You need to make changes to your expense habits to pay off an unwieldy car loan.
