The pandemic, if anything, has seen the divide between rich and poor grow more and more, and no only the super rich, with the world of auto loans as a good target as any other. High-risk borrowers, or those with the worst credit histories, are falling further and further behind, according to a new report.
High-risk borrowers tend to get the highest interest rates on auto loans, because they have credit scores that are bad, which, on paper, makes sense, because the lender is taking more risk, but on the real world sets a lot of poor people. fail. That’s especially in a pandemic economy where many working-class jobs, like bartending, simply don’t exist.
Since The Wall Street Journal:
About 10.9% of high-risk borrowers with outstanding auto loans or leases were more than 60 days past due in February, up from 10.7% in January and 8.7% a year earlier, according to the firm TransUnion credit reports. It marked the sixth consecutive month-over-month increase and the highest level in monthly data since January 2019.
More than 9% of sub-prime auto borrowers were more than 60 days past due in the fourth quarter, the highest quarterly figure in data dating back to 2005.
What happens after you fall behind on your car loan is usually repossession, or the lender withdraws the collateral, but it’s not always the end of the story either. The WSJ story has some grief stories, but none quite as furious as this:
Nick Goodwin was in the process of starting trucking school when the pandemic hit and did not qualify for unemployment benefits. But with his girlfriend out of work, he called his car lender for help. The lender, Westlake Services LLC, said he did not qualify for relief because he was not behind on his payments.
Goodwin began losing the monthly payment, a bill of about $ 560 on a Dodge Ram, in May. “Things started to get tough,” he said. “None of us [were] labor; I am working to try to survive and take care of our children. “
Westlake gave him several extensions that prevented the truck from being repossessed. But when they finished, Goodwin still couldn’t pay his monthly bill and the truck was repositioned in October. Goodwin said a family friend gave him about $ 900 to get it back. Subsequently, he 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 to provide as much assistance as possible to those experiencing immediate hardship.”
Goodwin said he and his girlfriend recently found work and are making payments. But they can’t use the truck because it was damaged during recovery and needs a new transmission, he said.
I guess Mr. Goodwin isn’t making payments on a Dodge Ram yet, but a Ram, because Dodge Ram hasn’t been around in over a decade, but shit, if someone got my car back and messed up the transmission in the process (presumably during towing) and then handed it back to me like that, I’d be so damn mad. Hopefully, Mr. Goodwin is in contact with a good attorney.
And the easy reaction here is always to shame people for accepting loans that they ultimately can’t pay, but I hope the past year has led some people to reconsider that view, given the economic calamity. Because if you’ve ever been in dire straits, you know you are up to your final options.