What happens if I default on my car loan?
By Funto Omojola | NerdWallet
More Americans are defaulting on their car loans due to larger loan amounts, high interest rates, increased living costs and more.
The number of borrowers who fell more than 90 days behind on their auto loans rose to 2.66% in the fourth quarter of 2023 — a nearly 20% increase from the same time last year, according to data from the Federal Reserve Bank of New York.
Why are more people defaulting on car loans?
Borrowers are struggling in part due to sky-high interest rates and increased expenses that have made it difficult for many to be current on their loans, according to Vince Shorb, CEO of the National Financial Educators Council.
“A lot of people are at that point now where they’ve been barely making ends meet,” he says. “They’ve just been getting trounced with inflation, trounced with higher interest rates across the board.”
Many auto lenders offer debt relief programs that can lessen the impact for struggling borrowers — but the key is to reach out before you’re underwater on your loan.