More car owners delinquent on loan payments

11.25.08
By Lewis Green

If you are feeling financially strapped and are faced with deciding between making a payment toward your home loan or your car loan, chances are it would not be difficult to choose.

Of course, no one wants to find themselves confronting such a decision in the first place, but an article in USA Today suggests that many Americans who had previously spent beyond their means to land the vehicle of their dreams are discovering that they cannot afford to pay for it.

Melinda Zabritski of Experian's auto group told the news provider that 30-day car loan delinquencies have risen by slightly more than 8 percent, compared with the same time last year.

Meanwhile, the number of loans that have not been paid for 60 days has increased by 12.7 percent. Many of these cars will end up being repossessed, Zabritski said.

With these figures in mind, it may come as no surprise that lending standards for car loans are growing more stringent.

It used to be that even borrowers who did not have great credit were able to snag an auto loan - albeit with a higher interest rate and more money down.

However, current conditions mean that lenders are growing pickier. For example, GMAC - the financing division of General Motors - announced recently that it would not lend money to anyone who has a credit score under 700.

These kinds of measures are aimed at reducing delinquencies and vehicle repossessions, but it may also make new cars and trucks less accessible to the average person.

If you are in the market for a new car, make sure you obtain copies of your credit scores from all three bureaus and see where you can make improvements before applying.

Remember that the higher your score, the better the terms of the loan are likely to be.

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Auto repossessions are rising