Learn what car loan forbearance is, how it differs from hardship programs, when to request it, and how it affects your credit score

If you're struggling to make your car payment, you may have heard the term "forbearance" thrown around as a potential solution. But what exactly is car loan forbearance, and how does it differ from other relief options? More importantly, is it the right choice for your situation?

This guide explains everything you need to know about auto loan forbearance—how it works, when to use it, how it affects your credit, and what alternatives you should consider.

What Is Car Loan Forbearance?

Car loan forbearance is an agreement between you and your lender that allows you to temporarily pause or reduce your monthly car payments for a specific period of time. During forbearance, you're not making your regular payments, but your loan remains in good standing and your car won't be repossessed.

The key word is "temporarily." Forbearance is designed for short-term financial difficulties, not permanent affordability problems. Most forbearance periods last 1-3 months, though some lenders offered longer periods during the COVID-19 pandemic.

How Forbearance Differs From Other Relief Options

People often confuse forbearance with other relief options. Here's how they differ:

Forbearance vs. Deferral: These terms are often used interchangeably, but technically, forbearance can include both skipping payments entirely (deferral) or making reduced payments temporarily.

Forbearance vs. Loan Modification: Forbearance is temporary; a loan modification permanently changes your loan terms (like extending the length or reducing the interest rate).

Forbearance vs. Hardship Program: Hardship programs are broader and may include forbearance, deferral, payment reduction, or other options. Forbearance is one type of hardship assistance.

Forbearance vs. Refinancing: Refinancing replaces your current loan with a new one. Forbearance keeps your existing loan but pauses payments temporarily.

For more on the full range of options available, see our guide on help with car payments.

How Car Loan Forbearance Works

Here's the typical process and what you can expect:

The Application Process

1. Contact Your Lender: Call your lender's customer service or loss mitigation department as soon as you know you'll have trouble making payments.

2. Explain Your Situation: Clearly describe why you need forbearance (job loss, medical emergency, etc.) and how long you expect to need relief.

3. Provide Documentation: Most lenders require proof of hardship—unemployment benefits statement, medical bills, layoff notice, etc.

4. Receive Terms: If approved, your lender will tell you how long the forbearance lasts and what happens afterward.

5. Get It in Writing: Always request written confirmation of your forbearance agreement before you stop making payments.

During Forbearance

While in forbearance, one of these scenarios typically applies:

Option 1 - Complete Payment Pause: You don't make any payments for the forbearance period (most common).

Option 2 - Reduced Payments: You make smaller payments than your regular amount.

Option 3 - Interest-Only Payments: You pay only the interest portion, not principal.

Important: Even when payments are paused, interest usually continues to accrue on your loan balance. This means your total amount owed increases slightly during forbearance.

After Forbearance Ends

When your forbearance period ends, you have several possible outcomes:

Deferred Payments Added to End of Loan: The missed payments are added to the back of your loan term. If you skipped 3 payments, your loan extends by 3 months.

Lump Sum Due: Some lenders require you to pay all missed payments at once when forbearance ends (least common and most difficult for borrowers).

Repayment Plan: The missed amount is divided into installments and added to your regular payment for several months.

Loan Modification: The lender restructures your loan with new terms to accommodate the missed payments.

The specific outcome depends on your lender's policies and what you negotiated. This is why getting the terms in writing upfront is crucial.

When to Use Car Loan Forbearance

Forbearance works best in specific situations. Here's when it makes sense:

Ideal Situations for Forbearance

Temporary Job Loss: You've been laid off but expect to find new employment within 1-3 months.

Medical Emergency: You had unexpected medical bills or a health issue that temporarily affects your income.

Short-Term Income Disruption: Your hours were reduced but will return to normal soon, or you're waiting on commission/bonus payments.

Seasonal Income Gap: You have seasonal work and need to bridge a gap between paychecks.

Natural Disaster Impact: Your home or workplace was damaged, affecting your income temporarily.

Waiting on Insurance or Settlement: You're expecting a payment that will allow you to catch up.

In all these cases, you can reasonably expect your financial situation to improve within a few months. Forbearance buys you time to get back on your feet.

When Forbearance Isn't the Right Choice

Permanent Income Reduction: If you've taken a lower-paying job permanently, forbearance just delays the inevitable. Consider a loan modification or refinance instead.

You Can't Afford the Car Long-Term: If your car payment is simply too high for your budget, forbearance won't solve that. You may need to sell or surrender the vehicle.

You're Already Significantly Behind: If you've already missed 3+ payments, your lender may not offer forbearance. You may need to negotiate a reinstatement plan instead.

You Have Multiple Debt Problems: If you're struggling with many debts, not just your car payment, you may need comprehensive debt counseling or bankruptcy consultation.

For guidance on permanent solutions, read about car payment relief options.

How Forbearance Affects Your Credit Score

This is one of the most common questions about forbearance, and the answer is: it depends on how your lender reports it.

Credit Reporting Scenarios

Best Case - Reported as Current: Some lenders agree not to report anything negative during an approved forbearance period. Your account shows as current, and your credit score isn't significantly affected.

Middle Ground - Reported as Modified: The lender notes that your account is in a "modified" or "forbearance" status. This may have a small negative impact, but much less than missed payments.

Worst Case - Reported as Delinquent: If your lender reports the missed payments as late, your credit score will drop significantly—even though you're in an approved forbearance.

How to Protect Your Credit: Before agreeing to forbearance, explicitly ask: "How will this be reported to the credit bureaus?" and "Will my account show as current during forbearance?" Get the answer in writing.

Credit Impact Compared to Alternatives

Even in the worst case, forbearance typically causes less credit damage than:

• Missing payments without any arrangement (major negative impact)
• Repossession (severe negative impact, stays on report for 7 years)
• Voluntary surrender (severe negative impact)
• Bankruptcy (severe negative impact, stays on report for 7-10 years)

Rebuilding Credit After Forbearance

Once forbearance ends and you resume regular payments:

1. Make every payment on time—this rebuilds your payment history
2. Keep credit card balances low (under 30% of limits)
3. Don't apply for new credit unnecessarily
4. Monitor your credit report for errors and dispute any inaccuracies
5. Be patient—positive payment history takes time but works

For a detailed roadmap, see our guide on rebuilding credit after repossession (the same principles apply after forbearance).

Common Forbearance Terms and Requirements

Every lender has different policies, but here are typical terms you'll encounter:

Duration

• Standard: 1-3 months
• Extended (during crises like COVID-19): Up to 6 months
• Rare: Longer than 6 months

Eligibility

• Payment History: Most lenders prefer borrowers current on payments or less than 30 days late
• Account Age: Some require you've had the loan for at least 6-12 months
• Previous Forbearance: Lenders may deny if you've used forbearance recently (within the past year)
• Documented Hardship: You must prove financial difficulty

Documentation Required

• Proof of income loss (termination letter, reduced pay stubs)
• Unemployment benefits statement
• Medical bills or doctor's note
• Bank statements showing reduced income
• Written explanation of your hardship

Costs

• Application: Usually free
• Administrative Fee: Some lenders charge $25-$100 to process forbearance
• Interest Accrual: Interest continues during forbearance, increasing your total loan cost
• No Late Fees: Legitimate forbearance should not include late fees

Major Lenders' Forbearance Policies

While policies change and you should always verify current terms, here's a general overview of what major auto lenders typically offer:

Ally Financial: Offers forbearance up to 3 months; missed payments added to end of loan; must have account at least 6 months.

Capital One Auto Finance: Payment deferral available for qualified customers; typically 1-2 payments; requires hardship documentation.

Wells Fargo Auto: Offers payment deferral and loan extension options; terms vary based on individual circumstances.

Chase Auto: Forbearance available on case-by-case basis; typically up to 2 months; must be current or less than 30 days past due.

Credit Unions: Often more flexible than banks; many offer forbearance with favorable terms and minimal credit reporting impact.

Subprime Lenders (Santander, Credit Acceptance, etc.): May offer forbearance but often with stricter terms and higher interest accrual.

Always contact your specific lender for their current policies—these change frequently.

How to Request Forbearance (Step-by-Step)

Follow these steps to maximize your chances of approval:

Step 1: Contact Your Lender Early

Don't wait until you've already missed payments. Call as soon as you know you'll have trouble with your next payment. Early communication shows responsibility and gives you more options.

Find your lender's phone number on your monthly statement or loan paperwork. Ask to speak with the "loss mitigation" or "hardship" department, not general customer service.

Step 2: Prepare Your Case

Before calling, gather:

• Your loan account number
• Documentation of your hardship
• A clear explanation of when you'll be able to resume payments
• Your proposed solution (e.g., "I'd like to defer 2 months of payments")

Use our Hardship Letter Generator to organize your thoughts and create a written request.

Step 3: Make the Call

When you call:

• Be honest and direct about your situation
• Explain the cause of hardship and that it's temporary
• State specifically what you're requesting
• Ask how it will be reported to credit bureaus
• Take notes: date, time, representative's name, what was discussed
• Ask for a reference number for your request

Step 4: Submit Documentation

Your lender will likely ask you to submit documentation via email, fax, or their online portal. Submit everything promptly—incomplete applications get denied or delayed.

Step 5: Get Written Confirmation

Once approved, you should receive written confirmation that includes:

• The forbearance period (start and end dates)
• What you owe during forbearance (if anything)
• What happens after forbearance ends
• How it will be reported to credit bureaus

Don't stop making payments until you have this in writing.

Step 6: Calendar Important Dates

Set reminders for:

• When forbearance ends
• When your first post-forbearance payment is due
• Any check-in calls or updates your lender requires

Sample Script

"Hi, my name is [Your Name] and my account number is [Number]. I'm calling to request payment forbearance due to [specific hardship]. I was [laid off / had medical emergency / etc.] on [date] and need temporary relief while I [find new employment / recover / etc.]. I've been a good customer for [time period] and have always paid on time. I'm requesting forbearance for [1-3 months]. Can you tell me if I qualify and what my options are?"

Alternatives to Forbearance

Forbearance isn't your only option. Depending on your situation, these alternatives might work better:

Payment Deferral: Similar to forbearance but specifically refers to skipping payments that are added to the end of your loan.

Loan Extension: Permanently extending your loan term to reduce monthly payments (better for permanent income changes).

Refinancing: Getting a new loan with better terms from a different lender (best if your credit has improved).

Payment Plan: If you're already behind, catching up gradually by adding extra to each payment.

Selling the Car: If you can't afford it long-term, selling before repossession may be best.

Voluntary Surrender: Giving the car back to avoid repossession (last resort, still damages credit).

For a complete comparison, see our guide on car payment relief options.

Forbearance FAQs

Q: Will forbearance hurt my credit score?
A: It depends on how your lender reports it. Ask them specifically before agreeing to forbearance.

Q: Can I get forbearance if I've already missed a payment?
A: Maybe. Some lenders will still work with you if you're only 30-60 days behind. The sooner you call, the better.

Q: What if I need more than 3 months?
A: Ask for an extension or consider a loan modification instead. Multiple consecutive forbearances are rare.

Q: Do I have to pay back the missed payments all at once?
A: Usually no—they're typically added to the end of your loan or spread out over a repayment plan. Confirm this with your lender.

Q: Can my lender deny my forbearance request?
A: Yes. Lenders aren't required to grant forbearance. However, most major lenders have programs available and prefer to help rather than repossess.

Q: Will interest keep adding up during forbearance?
A: Yes, in most cases. Your principal balance will increase slightly due to accrued interest.

Take Action: Is Forbearance Right for You?

Car loan forbearance can be a lifeline if you're facing temporary financial hardship. It gives you breathing room to get back on your feet without losing your vehicle or destroying your credit.

Forbearance is right for you if:

• ✅ You're facing a temporary (not permanent) financial problem
• ✅ You expect to resume payments within 1-3 months
• ✅ You're currently current or only slightly behind on payments
• ✅ You've contacted your lender and they offer favorable forbearance terms

Forbearance may not be right if:

• ❌ Your income reduction is permanent
• ❌ You can't afford the car even after forbearance ends
• ❌ You're significantly behind already (3+ months)
• ❌ You have multiple debts you're struggling with

If forbearance isn't the right fit, don't despair—there are other options. Start by exploring auto loan hardship programs or talking to a nonprofit credit counselor.

The most important thing is to act quickly. Contact your lender today, explain your situation honestly, and work together to find a solution. The longer you wait, the fewer options you'll have.

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Free Tools to Help You Keep Your Car

• Repo Countdown Tool – Calculate your timeline before repossession becomes likely
• Hardship Letter Generator – Create a professional forbearance request letter
• Debt Relief Quiz – Get personalized recommendations for your situation

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