Can you move a car payment to the end of your loan?

When facing unexpected financial challenges, managing regular expenses like car loan payments can become difficult. Many individuals wonder if it is possible to adjust their car payment schedule to alleviate immediate pressure. Lenders sometimes offer options that allow borrowers to temporarily postpone payments, providing a short-term solution during periods of hardship. These arrangements are not a cancellation of the debt but rather a restructuring of the repayment timeline.

Understanding Payment Deferral and Loan Extension

“Moving a car payment to the end of your loan” typically refers to a payment deferral or a loan extension. A payment deferral involves a temporary suspension of your monthly car payments. Instead of making the usual payment, you either skip it entirely or pay only the interest portion for a defined period. This relief period provides immediate financial breathing room, but the missed payments are not forgiven; they are added to the end of your loan term, extending the overall repayment period.

A loan extension operates similarly, allowing you to postpone one or more scheduled payments to a later date. These options do not eliminate the payment obligation; they merely postpone it. The paused amounts become due at the conclusion of the original loan term.

Eligibility and Lender Criteria

Lenders set specific conditions for borrowers to qualify for payment deferral or a loan extension. A common requirement is that the borrower must be current on their loan payments.

The type of loan and the lender’s individual policies also play a role in determining eligibility. Some lenders may have built-in deferment policies, while others may require a formal request. The number and frequency of deferments permitted can vary; some lenders might allow only one deferment over the loan’s lifetime, while others may permit one or two per calendar year. Borrowers might also need to provide documentation of their financial hardship, such as proof of income loss or unexpected expenses, to justify the request.

The Process of Requesting a Payment Adjustment

To formally request a payment adjustment, borrowers should first review their loan agreement or contact their lender directly to understand available policies. Many lenders prefer proactive communication as soon as financial difficulty arises, as it is often more cost-effective for them to work with a borrower than to pursue repossession. Typically, you can contact the lender by phone, through an online portal, or by mail.

When communicating with the lender, it is helpful to have your account number and personal details readily available. You should be prepared to explain the reason for your financial hardship and when you anticipate being able to resume regular payments. Some lenders may require a formal hardship letter outlining these details. If approved, it is advisable to get the agreement in writing, including the representative’s name and any case numbers.

Financial Impact of Deferring a Payment

Deferring a car payment can provide immediate relief, but it has significant financial consequences over the loan’s lifetime. Interest continues to accrue on the outstanding principal balance during the deferred period. For example, if you defer a $404 monthly payment, you will owe more than that amount at the end of the loan because of the additional interest charges.

The loan term will be extended by the number of deferred payments, pushing out the final payoff date. Unpaid interest may be capitalized, meaning it is added to the principal balance, further increasing the amount on which future interest is calculated. This can result in a higher monthly payment amount once regular payments resume, or a larger final “balloon payment” at the end of the extended term.

Regarding credit reporting, a properly managed deferment, approved by the lender, typically does not negatively affect your credit score. Lenders generally report these accounts as “paying as agreed” or use special codes indicating the payment was deferred. However, if you fail to resume payments as agreed after the deferment period, it can lead to negative credit reporting and potentially repossession.

Other Options for Financial Hardship

Beyond deferral, several other strategies can help manage car loan payments during financial hardship. One option is to request a change in your payment due date to better align with your income schedule. This can prevent late payments if your payday falls after your loan due date. Lenders may allow one such change during the loan term.

Refinancing the car loan is another avenue, particularly if your credit score has improved or interest rates have changed favorably. This involves obtaining a new loan to pay off the existing one, potentially leading to a lower interest rate, reduced monthly payments, or a different repayment term. While a longer refinancing term can lower monthly payments, it might also increase the total interest paid over time. Selling the vehicle, especially if its value exceeds the outstanding loan balance, can eliminate the debt entirely and potentially provide funds for a more affordable car.