Figures show that six million Americans are behind on their auto loan payments by at least 90 days. This delinquency is causing concerns for lenders. Researchers from the Federal Reserve Bank say that late payment levels are now at their highest since 2010, and pressure may increase for borrowers to prove their financial circumstances.
The car loan market is robust but recent years have seen an increasing level of delinquency in subprime loans. As a result, there is a mounting worry, because similar trends in behavior occurred in the lead-up to the financial crisis in 2008.
In a blog post, a team member from the Federal Reserve Bank of New York wrote, "The increased level of distress associated with subprime loan delinquencies is of significant concern, and likely to have ongoing consequences for affected households."
There is little risk posed to the overall financial system, noted credit rating agencies. This is because it is simpler to repossess a vehicle than a bank-owned properties. In the housing market, any spike in foreclosure levels would hit property prices hard, undermining the sector and causing a crash. The same is not true of the auto loan industry. It is nevertheless important for borrowers to consider their financial stability before opting for large car loans.
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