The U.S Auto Loan Debt Market Is Reminiscent Of The Subprime Mortgage Bubble
In trying to get a loan such as for car or house, it is believe that you must have a high FICO credit score, how ever the scenario have been different now, it is now seen that even those with lower FICO credit score do get money from lenders also, even credit score that is below 640.
Mostly those companies with subprime prefer those with bad credit score because they are allow to charge high interest rate for borrowers that have a low credit score history even though it can be relatively risky
This subprime lending have been very unfavorable for all the parties involve in the process which includes the subprime lenders, investors and borrowers. In-fact not long ago, subprime lending have caused the collapse of housing bubble and led to the collpse of US mortgage crisis also
U.S. AUTO LOAN DEBT MARKET
It has been critically observed that the U. S. loan debt market continually grown from 2006 at an annual growth of 10 percent. The U S auto loan debt growth stands as the second fastest growing consumer debt market behind mortgage debt market. And this auto loan was observed to be creeping up to the student loan debt and this invariable means the subprime auto loan debt market may likely face a kind of distress.
US AUTO LOAN DELINQUENCIES
The Deliquent loans that are more than 90 days are over 3 percent of all auto loans of around in 2016 But those auto loans that are deliquent for about 90 days have decreased from its level since june 30, 2010. And from pre recession, deliquent rate have increase for over 2 percent. This may sound like a very bad story but the better side is that the size of the auto loan is not debt market is not likely to cause any form of systemic issue.
Lenders and investors are advice to pay serious attention to the U.S. auto loan Debt market which is the second fast growing consumer debt market behind the mortgage debt market.
THE BOTTOM LINE
Auto loan debt market is a very risky one because they go ahead to even lend people with low credit score loan. Therefore if anything happen like this, it may not be easy for them to get there loans back. For instance, if the economy of the U.S. begins to weaken which would lead to firing of high number of staffs subprime borrowers may default in there loan payment which will be of a great disadvantage and lost to the auto loan debt market. Subprime lending is very expensive and the interest rate could sky rocket at any given point in time in a kind of increase you can’t see in auto loan interest rate and lenders use that as a more reason for them not to be able to pay back the loan
Originally Published By: Huffpost.com