Are we driving toward another global financial crash? The Federal Reserve Bank of New York said that is a “significant concern”, looking at the subprime auto loan delinquencies.
In the United States, more “already-indebted” borrowers are exploiting this type of car loan. Interest rates for such loans have been at historic lows, making it a great bait for wishful car owners. The problem doesn’t lie in the loans themselves but the inability of some borrowers to keep up with the monthly dues.
The overall consumer debt landscape has been changed significantly as the total outstanding auto loan stocks rose to a staggering $1.1 trillion in the U.S. The Federal Reserve Bank of New York warned that these loans have been availed much faster than in any other time in history.
Equifax: “Subprime Car Loan Market is Stable”
However, Equifax has said that the blame regarding the rise of car loan delinquencies has been greatly misplaced on the subprime market. Equifax is one of the largest consumer credit reporting agencies in the United States.
Equifax and Experian data both show that there was a significant increase in the number of delinquencies from 2015 to early this year. Furthermore, Forbes has said the delinquency rates have become all-time high since 2010. Although this statistics may rattle analysts, research supports that a global financial crisis caused by the auto loan market is far from happening. Equifax’s recent research has found out that the loan performance has remained very stable.
Probing through the data they’ve gathered, it reflects that the loan market’s performance is stable and is fairly consistent across the board. The number of new and old vehicles that are financed have also increased in the last nine years. The increasing number of delinquencies, therefore, is natural given the increase in the auto loan financing.
Should You get an Auto Finance with a Subprime loan? Why Not!
If you think that financing your vehicle with a subprime loan is not a good option now, think again.
Lenders, in general, have remained very buttoned-down in their qualifications compared to the pre-recession times. The steady growth of subprime borrowers does not pose a threat. And while the growth in the auto lending commerce is brought about by both prime and subprime consumers, a majority of the banks and credit unions only have 13.1% subprime portfolios.
Your bad credit score may scare you, but you should know that credit reporting agencies have dealt very sparsely with bad credit loans. The delinquencies should not be taken as a sign of uncertainty in the subprime market. The consistent loan performance of the market is a great pointer that the subprime car loan commerce in the U.S. remains healthy.