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Auto Loan Default Rates Growing – 7 Ways to Avoid Repossession

Auto loan default rates inched up in the U.S. during December while the overall economy remains vibrant. Baffling, especially among car dealers and auto lenders. Lender concerns are growing as more evidence emerges regarding a potential recession in late 2019 into 2020.

Auto Loan Default Rates

The latest S&P/Experian Consumer Credit Default Indices for December reveals the auto default rate rose from 0.93% to 1.03%. The December numbers also shows the bank card default rate rose from 3.25% to 3.34% and the first mortgage default rate increased from 0.64% to 0.67%.

According to the Federal Reserve Bank of New York reported 3.6% of auto loan balances were 90 or more days delinquent.

Overall, consumer credit in the U.S. is currently under control, according to CardData.

Struggling

What do you do if you are struggling with a huge car payment or find yourself owing more than its worth?

Here are the keys to survival and to avoid having your car towed away in the middle of the night.

Action Plan

A. Contact your lender as soon as you know you will fall behind on your payments.This confirms you want pay your loan. The sooner you contact the lender, the more choices the lender will be able to offer you.  

B. Request to change the payment due date to match up to your payday or other income. This could help you avoid missed payments and late fees, which can be devastating to your credit score.

C. Explore extending or postponing payments with your lender to help you get back on track and give you time to figure out a plan to catch up. This could also lower monthly payments, but, unfortunately can also lengthen the term of your loan and increase the total amount you have to pay for the loan.

D. Consider trading in your current vehicle for a more affordable one, but crunch the numbers carefully as you end up worse off with a higher loan and a longer payment period.

E. Investigate offers by big lenders to refinance your current loan. Paying on an auto loan with a 4% annual interest rate instead of 9% annual interest rate, could save thousands of dollars.

Crazy Option

F. Weigh getting totally rid of the car expense (payments, insurance, tags, etc.). Could you ride public transportation, car pool, Uber or Lyft to handle your day-to-day needs? Also renting a car for the weekend or for special trips?

G. Research more advice on dealing with auto loans from the Consumer Financial Protection Bureau.