Difficult times can lead people to take on riskier forms of debt, and some lenders will take advantage by trapping financially vulnerable borrowers with high interest rates and lengthy repayment terms.
Several lenders are being accused of issuing subprime car loans to borrowers. Interest rates on subprime car loans can go as high as 20 percent and carry a default rate of 25 percent. Terms on some of the loans are 96 months, far beyond the normal rate of 60 months on regular car loans.
Subprime lending became a commonly used word to describe one of the causes of the 2008 mortgage crisis and resulting recession. It is the process of lending to borrowers with a poor credit history, often at higher interest rates and for a longer period.
Subprime car loans have attracted the attention of the Securities Exchange Commission (SEC). The SEC and the Justice Department have accused some lenders of wrongly repossessing vehicles and then releasing them to new subprime borrowers.
Can Filing for Chapter 13 Bankruptcy Reduce Car Loan Payments?
TransUnion numbers show that auto loan failure rates are increasing and repossessions are up. Fortunately, borrowers who are so far behind on payments that they owe more than what the car was originally worth might have options.
Last week, we wrote about reducing the amount of money owed on a car loan by filing for Chapter 13 bankruptcy. By using what is known as the “cramdown”, borrowers underwater on car loans might have an option for reducing payments. Other options for discharging the loan might be available, and contacting an attorney can be the first step in eliminating burdensome debt.
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The Sader Law Firm – Kansas City Bankruptcy Attorneys