When I saw this headline I was shocked and dismayed.
That is 1 in 30 US adults.
If these people are struggling to pay their bills while the economy is doing relatively well (low interest rates, low unemployment, etc), what will happen if the economy takes a down turn?
The majority of the delinquent payers are under 30 and have low credit scores. This means that they probably have a higher APR than older borrowers with established careers and credit.
The article also noted that there was a higher default rate among those who use auto dealer financing.
This could be because it is in the dealer’s best interest to sell you more car than you need, not to mention all the upgrades…
And, unfortunately for those who find themselves in this situation, none of the presidential candidates are discussing a massive auto loan forgiveness program…
What are the key takeaways?
1. Just like any loan, determine your budget and the maximum you can comfortably afford to spend (including maintenance, insurance, taxes (if applicable), and other related costs)
2. Do not be swept off your feet by some sweet talking seller who plays on your emotions. You can survive without the specialty floor mats.
3. If you find yourself with too much month at the end of the money, take a hard look at what expenses you can cut, what assets you can sell, what liabilities can be negotiated, and what options you have to earn additional money.
4. Remember lenders favor borrowers who do not really need to borrow. Become one of those people. Before spending on credit, figure out what you can do to spend less using cash. Save for big purchases. It is recommended you save 10% of your after-tax income (but keep your allocations balanced- allocate an equal percentage to short-term savings, investment savings, education, play, and giving)
5. Become financially empowered. Learn about money, finances, and investing. Ask questions. Join a community dedicated to this purpose.