Delinquencies On Credit Cards & Auto Loans Rise - Consumer Credit
A consistent low interest rate environment over the past eight years has made it easy for American consumers to purchase expensive automobiles and to borrow on credit. Consequently, the amount of outstanding auto loans and credit card balances has escalated over the same period. Increasing delinquencies have become a concerning trend as numerous consumers are past due on auto and credit card payments 90 days and more.
Auto loan delinquencies are at the highest levels in nearly 15 years, a result of what is believed to be looser lending standards. Not only that, but consumers are carrying loans for longer terms, with the average new car loan at 69 months. In April of 2013, the average new car loan was for 65 months.
A rising interest rate environment is also posing a challenge for new automobile buyers and consumers taking out credit. Higher rates raise monthly loan payments thus making it that much more challenging for consumers on an already tight budget.
Source: Federal Reserve Bank of New York