Car loan defaults are reaching historic numbers. Reports looked at subprime borrowers who were at least 60 days behind on their payments and found that it applied to 6.65% of these borrowers. That is the highest number in decades, according to some rating systems, which have not seen such high default percentages among subprime borrowers since the 1990s.
Part of the reason for this is certainly that cars have become exceedingly expensive, and the average price of a new car is higher today than it was in the past. This means that even a relatively standard car loan could make up a large portion of a person’s monthly budget. But it may also show that borrowers are facing significant financial stress, which may mean that bankruptcy filings are also going to increase moving forward.
Car loans as an indicator
Often, financial experts look at car loans as an indicator of just how much debt and financial strain people are facing in the economy as a whole.
The reasoning for this is that many people prioritize their car loans. That car payment is the very last one they want to miss. They may miss utility payments, credit card payments, student loan payments and much more before they would ever miss a car payment. This shows the importance of cars in modern life in the United States.
But this also means that it works well as an indicator of severe financial issues. When people start missing car loans more and more often, it may indicate that they feel they have no choice. It could also mean that they are simultaneously missing other types of payments and facing overwhelming debt on many levels, which is when bankruptcy filings come into play.
Your bankruptcy options
If you are facing significant financial strain this year, both Chapter 7 and Chapter 13 bankruptcy may be a way to alleviate some of these obligations. Be sure you know exactly what legal steps to take.