As more consumers find themselves struggling to make ends meet in today's rocky economy, a larger percentage of consumers are finding it difficult to keep up with their car payments.
According to Experian, one of the major credit reporting agencies, during the first quarter of 2009, 2.5% of all auto loans were 30 days past due, up by 0.3% in the first quarter of 2008. And 0.8% of all auto loans were 60 days past due, up by 0.1% in 2008. The data from Experian include loans made through dealerships for new and used cars, plus direct bank loans to consumers. If you find yourself in this situation, try working out something with the lending institution before repossession becomes the only option. Some lenders may allow you to tag your missed payments to the back of the loan, thus extending the loan term.
It should be no surprise Experian's data show credit quality is deteriorating. Unlike in the past, consumers can now improve their chances of being approved for an auto (or home) loan by bringing more money to the table, as it relates to the down payment. Lenders will take more of a risk with larger down payments, especially customers with poor credit. As result of the credit decline, more dealers are opting toward pay-here buy-here options. Basically, the dealers provide higher interest loans on lower quality used vehicles.
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