The pandemic, in any case, has seen the division between rich and poor grow wider and wider, and no only the super rich, with the world of car lending as a goal as good as any other. According to a new report, subprime borrowers or those with the worst credit history are falling behind.
Subprime borrowers tend to get higher interest rates on car loans because they have bad credit scores, which, on paper, makes sense, because the lender takes more risks, but in the real world there are many poor people fail. This is especially true in a pandemic economy where there are simply not many working class jobs, such as the bartender.
From The Wall Street Journal:
Approximately 10.9% of subprime borrowers with outstanding car loans or leases expire more than 60 days in February, compared to 10.7% in January and 8.7% the previous year, according to the company. TransUnion credit information. It was the sixth consecutive monthly increase and the highest level of monthly data dating back to January 2019.
More than 9% of subprime car borrowers exceeded 60 days of maturity in the fourth quarter, the highest quarterly figure for data dating back to 2005.
What happens after you fall behind on your car loan is usually the recovery of possessions or the lender recovering the collateral, but it’s not always the end of the story either. The WSJ story has some unfortunate stories, but none as annoying as this one:
Nick Goodwin was in the process of starting truck school when the pandemic hit and he didn’t get unemployment benefits. But with his jobless girlfriend, he called his car lender for help. The lender, Westlake Services LLC, said it did not meet the necessary requirements because it was not behind in its payments.
Goodwin began missing out on the monthly payment, an approximate $ 560 bill on a Dodge Ram, in May. “Things started to get tough,” he said. “None of us [were] work; I’m doing parallel work to try to scrape to take care of our children. “
Westlake gave him several extensions that prevented the truck from being recovered. But when they finished, Mr. Goodwin still could not pay his monthly bill and the truck was replaced in October. Goodwin said a family friend gave him about $ 900 to get him back. He then received more monthly extensions because he could not pay the bill.
A Westlake official said the company “strives to keep all lines of communication open for our customers and provide as much help as possible to those in immediate difficulty.”
Goodwin said he and his girlfriend have found work recently and are paying. But they cannot use the truck because it was damaged during recovery and needs a new transmission, he said.
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I guess Mr. Goodwin still doesn’t make payments for a Dodge Ram, but for a Ram, because Dodge Ram hasn’t existed in over a decade, but shit, if someone got my car back and slowed down the transmission in the process (presumably during the trailer) and then returned it to me that way, I would be so damn crazy. Hopefully, Mr. Goodwin is in touch with a good lawyer.
And the easy reaction here is to always embarrass people into taking on loans that ultimately can’t be afforded, but I hope last year has led some people to reconsider that view, given the economic calamity. Because, if you’ve ever been in a terrible situation, you know you’re done with your final choices.