Paying back loans was a struggle for many American consumers in 2010, according to a new report from the American Bankers Association (ABA). The report, released on Tuesday, revealed the overall loan delinquency rate jumped in the third quarter. This was the second straight quarter to see increases.
Loan Delinquency Rate Jumps to 3.01 Percent
The ABA revealed the overall loan delinquency rate increased from 3.00 percent in the second quarter of 2010 to 3.01 percent in the third quarter. The association defines a delinquency as a payment that is at least 30 days overdue.
Some of the loans included in the overall delinquency percentage included those taken out for car financing, HELOC and credit cards.
According to the report, delinquency rates for auto loans provided by a bank increased from 1.67 to 1.74, representing the largest increase among loan types. However, auto loans arranged through dealers also saw a delinquency increase from 3.01 to 3.02.
Delinquency rates on credit cards issued by banks also increased in the third quarter. The report found that these delinquencies jumped from 3.62 to 3.64 percent.
Why Are Delinquencies Increasing?
The association attributed the increase in delinquencies to the still-high unemployment rate. However, because the unemployment rate has improved a bit (it decreased from 9.8 percent in November to 9.4 percent in December), the association believes that delinquency rates are likely to improve soon.
Also, the association acknowledged the increase in tax cuts could help. With the break taxpayers will receive in 2011 with a two-percent cut in their Social Security taxes, they are expected to save more money that would work toward keeping up with loan payments.
What to Do If You’re Falling Behind
Reading articles about loan delinquencies creates a bit of distance between data and reality. Of course, if you are among those people who are unemployed and falling behind on your loans then you know how stressful it really is to realize you could lose your car or home and suffer the consequences of having bad credit.
So if you are among the group of people who have struggled to keep up with your loan payments, it’s good to talk with your lender to explain your circumstances. Many lenders understand that the position you are in and are willing to help.
Don’t let your difficult time create even bigger problems in your future. Before simply allowing your own delinquency rate to skyrocket, talk to your lender to see if any arrangements can be made to help you avoid officially falling behind.