Leave it to Wall Street to resurrect the subprime loan. This time,
subprime has found a comfortable home in the automotive industry. In the
car addicted US culture, subprime debt is back in a massive way. Subprime auto debt
is the new risky debt product. This is a big deal. $924 billion in
total auto debt is rummaging around the economy. What is even more
disturbing is that delinquencies on auto debt are surging.
Repossessions are up 70 percent
because people simply can’t make their auto payments. What do you
expect when you are pumping out subprime debt trying to churn more sales
on marginal buyers? Most Americans are living paycheck to paycheck
so taking on another debt payment isn’t necessarily a wise move. How
big is this market? The latest data shows that a stunning one third of
new auto loans are in the form of subprime debt. This is telling given
that FICO is planning on being more lax with credit scores. Also, it
should tell you about the underlying health of the economy when a large
portion of your borrowers have marginal credit.
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