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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsWhy 'deep subprime' auto loans are beginning to worry Wall Street
Auto loans to consumers who have very low credit scores and may not be able to pay them back are starting to worry Wall Street.
Many auto loans, including those considered subprime, are securitized and sold to investors. But Morgan Stanley recently reported that the share of auto securities tied to deep subprime loans those given to borrowers with a FICO credit score below 550 -- has risen from 5.1 percent in 2010 to 32.5 percent today. It said defaults on those bonds have risen significantly in the past five years.
Almost a quarter of the more than $1.1 trillion in U.S. auto loan debt is owed by subprime borrowers, and delinquency rates have hit their highest point in seven years.
As if to underscore the concern, the Massachusetts attorney general on Wednesday announced a $26 million, two-state settlement with the subprime auto-loan unit of Santander bank for giving high-interest loans to car buyers whom it knew could not afford them.
Attorney General Maura Healy said the bank would then package the unsound loans into securities and sell them to investors. The Boston Globe quoted Healy as saying that for Santander, The global economic collapse wasnt a cautionary tale. It was a blueprint.
https://www.msn.com/en-us/money/markets/why-deep-subprime-auto-loans-are-beginning-to-worry-wall-street/ar-BBz6OsQ?li=BBnbfcN
Yikes!!! Can you say Deja Vu?
elleng
(130,974 posts)dixiegrrrrl
(60,010 posts)as the economy worsens, there will be more defaults there, too.
double whammy.
indie9197
(509 posts)You can't walk away from a student loan!
dixiegrrrrl
(60,010 posts)You technically owe a "forever" loan, true...but no income means no payment.
if you can't pay it because of no job, it sets up same situation in the economy
as those who could not pay their mortgages and those who cannot pay their car loans....
Whiskeytide
(4,461 posts)... on this?
Go Vols
(5,902 posts)but I think back in the '70s car loans were up to 36 months max.I bought a new car in '79 on an 18 month loan.
Now I see up to 72 months in the US and on Canadian TV up to 84 months,for a damn car.
If you can't pay it off in 36 months,maybe look at a cheaper car.
:/