A representative in the loss mitigation department required the following information before the bank would approve the refinancing:
- Signed and completed financial assistance application.
- Written hardship letter.
- Two most recent pay stubs.
- Two most recent bank statements for both checking and savings accounts.
- W-2 statements for last two years.
- Federal income tax returns for last two years.
- Declaration page showing current proof of insurance with bank as lien holder.
The bank offered to lower the interest rate and not report a loss to the credit bureau.
Edelman says our situation was perfect for a loan modification because we had previously been excellent customers, even sometimes prepaying our loan payments, as well as customers who had a very high overall credit score. Additionally, we called before the payments went past due.
"If you call as soon as you see you might have problems, but before the payments go past due, they might be more willing to work out different plans with you," he says.
Edelman adds that you should try for a car loan refinance even if you've had some late payments in the past. "If the bank recognizes a benefit from it and your documentation shows you're not trying to take advantage, then they still might try to work something out," he says.
Our original modification representative left the company, forcing us to resend the whole package a second time to a new representative. Four months after we began the auto loan modification process, our car loan refinance was finally approved. On the day we closed on the new loan, the bank also asked us to sign a statement saying we would make that loan payment before any unsecured creditors.
"I think that reflects the fact that many people are keeping their credit cards while letting their homes and cars go back to the bank," says Baker. "The thing you want to try to do is make arrangements with the banks so you can come out of these times in the best shape possible."
How to deal with the lender:
- Ask if the modification will affect your credit bureau report negatively.
- Make sure you get the name and number of the representative helping you and call at least once a week to check on the status of the application.
- Provide all requested information on a timely basis.
- Read the terms of the new loan carefully. Oftentimes, a late payment will nullify the new loan.
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