According to a new study from the Federal Reserve Bank of New York, a record seven million Americans are three months or more behind on their car loan payments. That’s one million more people than were behind by that amount in 2010. The study has some experts puzzled.
The researchers at the Fed of New York noted that they were surprised by the amount of people falling behind on auto loans because the economy is actually doing well. “The substantial and growing number of distressed borrowers suggests that not all Americans have benefitted from the strong labor market and warrants continued monitoring and analysis of this sector,” the economists wrote in a blog post about the study. The report found that the segments of the population most in trouble were younger people and those who had low credit scores. About eight percent of subprime borrowers — usually people with credit scores of 620 or below 620 — moved from good standing on their loans in early 2018, to delinquent in the fourth quarter. The report also showed that about 6.5 percent of the total debt issued by auto loan lenders was overdue. Of that overdue amount, 2.4 percent is considered in “serious delinquency” territory.
If you’re struggling with paying your auto loan, contact your lender and see if there are any options available to make payments easier. Try cutting back on entertainment spending and putting that cash toward making an extra car payment per month. Get in touch with your credit union and see if there’s an option to refinance your. loan at a better. rate. Use your tax refund (if you get one) to ease the burden. If it’s feasible, you could even try selling the car for as much as you can. Then use that cash to pay down the loan. The point is to chip away as much as you can, little by little.