We thankfully seem to be coming out of some of the economic challenges brought on by the pandemic, but a new crop of financial hardships is on the horizon. Subprime auto loans, which are issued to people with lower credit scores, are falling into past-due status at an alarming rate, reaching the highest rates of borrowers behind on loans in almost 30 years.
Subprime borrowers at least 60 days past due on their car loans grew to 6.11 percent last month, the highest rate since 1994. A combination of rising interest rates and higher purchase prices have made monthly payments more expensive than before, and an unstable job market isn’t helping the situation.
Repossessions are expected to show an increase this year of up to 300,000 actions as bills pile up for unfortunate buyers. As Automotive News pointed out, interest rates for subprime borrowers can be as much as three times more than those for everyone else, pushing payments up by hundreds a month in some cases.
We’ve been hearing threats of a recession for months, if not a couple of years now, but the economy keeps adding jobs, and things seem to continue plugging along. That said, the uptick in subprime defaults and repossessions could be a sign of trouble to come, as the least privileged people are often the first to feel the pinch.
[Image: Jonathon Weiss via Shutterstock]
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