Subprime Borrowers Behind on Car Loan Payments at Highest Rate in Six Years
Subprime borrowers are falling behind on their car loan payments at the highest rate in more than six years, according to S&P Global Ratings.
Competition has spurred lenders to loosen standards and resulted in more delinquencies and default by people with weak credit, the ratings firm said. Subprime borrowers were behind by more than 60 days on about 4.85 percent of auto loans in August, the highest level since January 2010. For prime loans, delinquencies in August rose to 0.5 percent, up from 0.41 percent in the same month in 2015. The figures apply to loans that have been bundled into bonds.
The ratings firm said it may have to downgrade some subprime auto loan securities that have high-yield grades because of the increased delinquencies and loan losses, a statement it first made last month.
After the financial crisis, mortgage lenders have been required by law to verify that applicants can repay their debt, but car lenders do not have that obligation.
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