Oh dear, are your car payments getting a tad too rowdy? Here’s what’s up!
So, our dear friends the auto loan delinquencies just felt an adrenaline rush. They’ve gone ahead and set a new record, breaking one that has silently sat there unchallenged for nearly 30 years. The audacity, amirite?
It seems like the average auto loan rates have become a bit of a diva with their rising demands and it’s throwing budget-conscious Americans off their game. Oh, the calamity of struggling to make those darn car payments every month!
Now, before you start envisioning your credit score going down in flames, let me remind you that there are levers you can pull. Just in case you appear to be circling the drain of auto loan delinquency, there are steps you can take to soften the blow.
But before we get to the rescue party, here’s some intel from Fitch Ratings that might prick your ears up. The delinquency circus among subprime auto loan owners hit a walloping 6.11% in September. A record high since Fitch started keeping an eye out in 1994. You can bet your last dollar, that’s some climb from the 5.28% recorded just one year earlier!
Ever wondered what the fuss about Auto Loan Delinquency is?
Well, it’s like this: When your car loan payment turns a blind eye to its due date and whistles past it, we call it a delinquency. Now Fitch, being the observant folks they are, keep a track of those loan payments that are playing hooky for 60 days or more.
And it’s been noted that these overdue payments seem to be favored more by a crowd we know as ‘subprime borrowers.’ Usually, these are folks dragging along lower credit scores, hunting for used vehicles, and grappling with inflated interest rates.
A payment doing a no-show for 30 days or longer gets your lender’s attention. They might tattle to the credit bureaus about your lapse, which could bring down your credit score. And that makes it feel like walking through molasses when you want to qualify for auto loans, mortgages
So, what’s the takeaway from this rise in auto loan delinquencies? Well, it seems more subprime borrowers are finding it challenging to make ends meet. Can’t say we didn’t see that coming, huh? Fitch put together a report that says household budgets getting a hit from inflation and student loan payments kickstarting again are part of the story. But hey, let’s look at the bright side as well – the low unemployment rates can act as a cushion. Well, the first rule of the game is simple. Keep making those car payments before they’re due and guard your credit score. A quick budget scan could help you check if you can trim some fat off of your expenses, or perhaps find a way to pump up the income. But if you still find the chasm staring back at you, don’t hit panic mode. We’ve more options up our sleeve. Guess what? An auto refinance loan may come to your rescue by replacing your current loan with a new one. And if the stars are aligned, maybe even at a lower interest rate. Thinking of taking the plunge? Click on your state to compare rates and get rolling! Well, if making your car loan payment is becoming as elusive as finding a purple squirrel, you have these four failsafe options: Don’t play hide and seek with your lender. They’re not it. If making the payment is going to be an uphill battle, let your lender in on the secret and hatch a plan together. As Thomas Belding, a financial planner from Chatham, New Jersey, advises, “If you’re expecting choppy waters ahead with your payments, keep the communication lines open with your lender. Remember, they’d much rather work with you to square their dues than have to seize your car.” Lenders can also shuffle your due date around to match your pay cycle, helping you sidestep a delinquency misstep. If your finances are feeling the pinch, see if your lender can arrange for a payment deferral. According to our pals at Experian, some lenders might let you play truant on one or two payments minus the additional fees. However, you’ll likely still owe the interest for those months. And those break months will probably be tacked onto your loan period. Do remember that! Well, during your tête-à-tête with your lender, you could also explore if you qualify for a loan modification. Suppose you can prove your financial crunch; your lender may be amenable to spreading your loan over a more extended period. Yeah, that could mean lower monthly payments. At the other end of the spectrum, your lender might propose a temporary payment plan that brings down payments for a short while. But as the Consumer Financial Protection Bureau notes, be ready to bounce back to the original payments and settle any skipped amounts. Another potential lifesaver? Auto loan refinancing (you know the drill, shop around for the best rates). Refinancing does a swap – replaces your current loan with a new one, possibly with sweeter terms. You might land lower monthly payments, but watch out for those pesky refinancing fees, a higher interest rate, or even increased loan duration. We don’t want you stuck making payments for a car you’ve long stopped driving. Difficult times call for difficult decisions. If your car payments are weighing you down, it may be prudent to let go of your car. It could be more sensible than missing payments. Maybe, it’s time to downgrade to a cheaper mode of transportation or consider an alternative. But then there’s the catch-22. If your car’s market value is in the doldrums compared to the outstanding loan balance, selling the car might not square off your loan, as Belding warns. You might need to shell out the difference if you sell the car on the cheap. However, you might be able to roll over this “negative equity” a href=”/how-do-auto-loans-work”>into a new loan for a more budget-friendly car. Sure, you’re starting on the back foot with your new loan, but sometimes we have to choose the best of the worst. So, there you have it. A few ways to navigate the rocky terrains of auto loan delinquency. And if you want more financial wisdom, sign up for our Dollar Scholar Newsletter. Get valuable tips, refreshing anecdotes, and let’s not forget some good, old animal pictures – what’s not to love? [Sign Up Button] Continue prying open the treasure chest of knowledge and dig up more gems from our resources: Your vehicle can make it rain savings; fancy refinancing with LendingTree? See Rates [/Here’s your key!] Really, What Can One Do to Dodge Those Sneaky Delinquencies?
Refinance Your Auto Loan and Aim For Lower Monthly Payments
[Read: States listing and refinancer links]Let’s Talk Plan B: What If Making Car Payments Feels Like Climbing Everest?
1. Talk to Your Lender
2. Ask About Deferring Payments
3. Fancy Extending Your Auto Loan?
4. Have You Thought About Selling Your Vehicle?