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Why Are So Many Americans Falling Behind On Their Auto Loan Payments?

A car loan is always a top priority payment for most Americans. The automobile is a necessity for most Americans – it’s how we get to work, pick-up groceries, and take kids to school. For most people, it is always the highest priority payment, even more so than rent or a mortgage.

However, according to the Federal Reserve Bank of New York, the number of Americans falling 90 days or more behind on payments has just reached 7 million people. That’s 1 million more than in 2010 — when unemployment reached 10 percent. 

The constant rise of loan delinquencies represents a clear signal of significant financial distress among working-class and low-income U.S. citizens.

A Closer Look at the Numbers:

Today is a much different environment than 2010 — job openings reached an all-time high and unemployment rates are less than 4 percent.  With a strong economy, many people now enjoy a job and economic security — so the number of car loans peaked with a record high of 17.5 million vehicles sold in 2016. 

Lenders are aggressively advertising vehicle loans and offer many loans to borrowers with subpar credit scores. While this practice extended loans to people who teeter on the ability to pay, it also caused a much higher number of defaults.

Data shows that borrowers with a credit score of more than 620 generally pay their loans on time. On the contrary, those with a score under 620 often end up falling behind with their payments. Most of them are under the age 30 — an age group that is typically struggling with high student loan debt. 

Avoid Auto Finance Companies – If Possible

Experts suggest getting financing from credit unions and banks rather than from car dealerships. Banks and other financial institutions often provide lower interest rates than auto finance companies. The percentage of late car loans is just 1 percent for credit unions, compared to a much higher 6.5 percent for auto finance companies. 

If you are having difficulties with your auto loan or being harassed by your auto lender, many options exist to help retain your vehicle and stop the creditor harassment. Please give the lawyers at Boss Law a call for a FREE CONSULTATION. 

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