Delinquencies on Auto Loans Falling, But Still too High

If you’re looking for signs that an economic recovery is truly underway, consider the falling numbers of delinquencies on auto loans. The American Bankers Association reported that 3.15 percent of indirect auto loans, mostly financed through car dealerships, were 30 days past due in the third quarter of last year. At the same time, 2.04 percent of auto loans made by banks were past due by the same number of days in the third quarter. This is an improvement from the days when auto loan delinquencies peaked in the fourth quarter of 2008, when delinquencies on indirect auto loans stood at 3.53 percent, and in the first quarter of 2009, when delinquencies on direct loans rose to 3.01 percent. Of course, the country’s financial troubles are not yet over, and the delinquency rates on auto loans are still too high. But the declining numbers bring at least some hope.

If you’re falling behind

If you are struggling to make your auto loan payments, you need to take immediate action. If you skip your payments, your credit score will plummet. And this will haunt you. Lenders of all types use credit scores to determine whether you qualify for mortgage, car, personal or business loans. Even if you do qualify for these loans with a low credit score, you’ll pay more to borrow your money; that’s because lenders charge higher interest rates to consumers who have low credit scores. If you stop making your payments, you might also lose your car. And in today’s car-centric society, that might keep you from getting to and from work.

Taking action

If you are worried that you can no longer afford the payment on your auto loan, immediately call your lender. If you’ve suffered a financial hardship such as a job loss, serious injury or illness that’s kept you from working or a drop in your annual income because of a reduction in your work hours, tell this to your lender. Tell your lender, too, that you don’t want to default on your auto loan, but that you do need some financial relief.

Modifying your loan

It’s in the best interest of your lender to work with you to keep you from falling into delinquency on your loan. After all, your lender wants to continue to receive some money from you, even if your payment is no longer as large. Your auto loan lender might offer to reduce the principal balance on your auto loan or lower your interest rate. Both moves will drop your monthly payment to a more affordable level. Falling behind on auto loans is a frightening experience. But you can ease your stress by taking quick action to prevent a delinquency.

Popularity: 1% [?]