Car loan defaults have been soaring in recent years. Some recent reports note that it is the highest level of default in 32 years. When looking at borrowers who are over 60 days behind, this type of default rate has not been seen since the mid-1990s.
It is also important to note that these borrowers are at least two months behind because that eliminates situations where it is a simple oversight or a miscommunication, such as someone putting a check in the mail and having it get lost on its way. These are borrowers who have failed to make their monthly payments repeatedly, so it is unclear if they will ever get current on those payments again.
Could this lead to a rise in bankruptcy filings?
In many ways, economic experts look at car loan defaults as a signal of future economic trouble.
Part of the issue is that car loans are usually very high on the priority list for borrowers. They would rather pay their car loan so that they can ensure they have reliable transportation than other types of debt, such as credit card loans.
So when you see car loan defaults specifically increasing, it often means that borrowers have exhausted all of their other options. They may have many other types of debt, and they could be defaulting on credit card payments, mortgage payments, medical bills and much more.
Car loans serve as an indicator of the economic pressure facing society as a whole. As this pressure grows, it could lead to a rise in bankruptcy filings in the coming years, as people seek to clear their debt and get a fresh financial start. It is very important for borrowers to understand exactly what legal steps they can take to address these issues.
