Auto Loan Defaults Soaring: What This Means For Borrowers
A new trend is emerging in the auto loan sector - high default rates on subprime auto loans. The amount of subprime loans is soaring. $2.5 billion of these loans were written in 2009, as compared to a massive number of $26 billion in subprime auto loans in 2016. Experts are comparing the latest default rates to the housing crisis of 2007. So, what does this mean for those who are looking to obtain an auto loan in the near future? There are three major things you can do to protect yourself from becoming a statistic in the auto loan default arena.
First, shop wisely. Go with a reputable auto dealer that can get loans from the major lending companies and big banks. If you can, avoid the "Buy Here, Pay Here," lots, as that is where most auto loan borrowers get into the most trouble. You should also pay close attention to the terms of your loan contract - specifically the interest rate, term of the loan, any prepay penalties and other issues that might cause you trouble down the road. Choose a traditional loan with no variable interest rate for the best results.
Clean Up Your Credit
If you don't qualify right now to get a good loan, don't rush things. Take the time to clean up your credit so you can qualify for a better loan with better terms. Pay off past-due bills, collection accounts and charged-off accounts. Many times, you can settle these accounts for pennies on the dollar. Keep your current bills current - make all payments on time and pay the minimum payment. Work on paying off your debts, starting with the smallest and working up to the next larger debt as you get smaller debts paid off. Don't apply for credit cards, store charge cards or anything else that will cause a hard inquiry to show on your credit report. Pay close attention to your credit score by using a free app to check the score.
Pay Your Payment On Time, Every Time
This is the most important thing you can do to ensure you don't become an auto loan default statistic. Pay your payment on time, every time it is due. If you are short, contact your lender right away. Most lenders are willing to work with you to delay the payment a few weeks or make other provisions so you don't have a hit on your credit report for paying late or not paying at all.
Utilizing this advice will help you enjoy your car, making it a source of happiness for you and your family, and not a source of stress and strife. Talk to the place where you are getting your auto loan for more information.