What a modification does
Arrears are capitalised into the balance and the loan is re-amortised, often at a new rate and term. The payment usually falls, but the longer term can raise total interest.
Ask whether the modification is recorded as a new agreement and how it appears on your credit file.
Worked example
£16,000 at 8.9% with 36 months left costs £508.05 a month. Adding £1,200 of arrears and restructuring at 7.4% over 48 months gives £415.07.
Interest rises from £2,289.85 to £2,723.59, so the restructure costs £433.74 more over its life.
Before agreeing
Compare the total cost, not just the payment. A longer term lowers the payment but usually costs more.
Check for modification fees and whether the new rate is fixed.
Inputs for the car loan modification calculator
Current balance
The balance before missed payments are added.
Missed payments to add
Arrears that will be capitalised into the new loan.
Current rate
The rate on the existing agreement.
Months left now
Payments left on the current agreement.
Rate after modification
The rate agreed in the restructure.
New term
The term of the modified loan.
CALCULATOR QUESTIONS
Car loan modification calculator questions
Does a modification lower my payment?
Usually, because arrears are spread over a new term. The total cost often rises.
How much does it cost?
In the example, £433.74 more interest over the life of the loan.
Is it better than defaulting?
Yes, if it keeps the agreement on track. Missing payments damages your credit file.
Can I pay it off early?
Check the new agreement for settlement terms and charges.