The delinquency rates dropped on auto loans made indirectly through dealers and directly to consumers in the second quarter. The numbers are provided by a report from the American Bankers Association (ABA) and may be an indicator that predictions made by economists that the economy has already hit rock bottom and is slowly-but-surely recovering and on target.
But then again, maybe not. While the report showed promising numbers in the auto loan realm, including a drop in dealer-arranged auto loans 30 days past due from 3.42 to 3.26 percent, and also a drop from 3.01 to 2.46 percent on auto loans made directly to consumers by banks, some other numbers in the report did not show proof of a recovering economy. For instance, home equity loan delinquencies rose from 3.52 to 4.01 percent in the second quarter. Also, personal loan failures rose from 3.47 to 3.90 percent.
ABA's chief economist, James Chessen, notes that the reason auto loan delinquencies have dropped while other numbers are on the rise is because auto loans are so easily cleaned up. A one- or two-month delinquency can result in a quick car repossession and bank charge off, while mortgage loans may spend numerous months delinquent before any action is taken.
Of course, you don't want to be in a position where your delinquency could turn into a repossession. So if you're in danger of this occurring, consider:
- Contacting your lender to see if you can make some type of payment arrangement until you are financially on track.
- Cutting costs like cable TV, eating out, and magazine subscriptions to help fund your car payments.
- Downsizing your vehicle to one that requires a less expensive monthly note.
While economic times are tougher than they have been in years, if you act carefully and accordingly, you can help avoid your own auto loan delinquency.
