According to a Federal Reserve Bank of New York report, a record number of Americans are over 90 days behind on their car repayments.
The financial institution cites 7 million people approximately as being overdue, and this is a greater number than during the crash.
The news is being described as a “red flag” as it shows that, despite falling unemployment rates, many Americans are struggling to pay bills.
Economists at the New York Fed said that “the substantial and growing number of distressed borrowers suggests that not all Americans have benefited from the strong labor market.”
Car Repayments are Crucial
According to Michael Taiano at Fitch Ratings, car repayments are a top priority for people as it is the means by which most people get to work. It is also crucial for many parents dropping children at school.
Taiano goes as far as saying “a car is usually a higher-priority payment than a home mortgage or rent.”
Because in the most extreme cases, if you can’t make housing repayments, then the idea of living in your car is a real possibility for some.
According to the LA Times, “When car loan delinquencies rise, it is a sign of significant duress among low-income and working-class Americans.” So is America’s younger generation struggling to pay for the necessities?
The New York Fed goes on to say that 2018 showed more “troubled borrowers” than there were in 2010 when unemployment hit 10%. Despite today showing unemployment rates below 4%, people are still over 90 days behind on their bills.
A Growing Problem?
What makes the issue worse is that those who are over three months behind on their car repayments often lose their vehicle. This will stifle work and other important commitments, all the while affecting credit scores.
Are you one of the affected Americans? Do you think this is a red flag for the US economy?
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