US Subprime Car, College Loans Surge to Hazardous Levels

Tuesday, February 21, 2017
By Paul Martin

SputnikNews.com
21.02.2017

Car and student loan delinquencies are on the rise in the US, as well as origination of this type of debt to subprime borrowers, which might result in a consumer debt meltdown similar in nature, if not in scale, to that of 2007-2008.

Kristian Rouz — As the current economic cycle in the US gradually draws to its close, Trump’s plans for economic reform and fiscal stimulus are being heralded as a way to avoid a new recession. However, sky-high levels of household indebtedness might mar the scenario, jeopardizing sustainable economic growth in the coming years, with delinquent car and college loans having climbed dangerously high in the last two years.

Both car loans and student debt have become more prominent in the structure of US households’ indebtedness over the post-Great Recession period, while the overall US economic recovery was fuelled by debt issued under the Obama administration. This puts additional downward pressure on the productive forces of the US economy, and is likely to complicate the new White House administration’s efforts to put the economy back on track.

Unlike mortgages and most credit card products, it is very easy to obtain car financing in the US, mainly because things such as underwriting standards are largely non-existent in this segment of the consumer debt market. Car loans usually involve sums of money that are not critically large, and have been perceived as being only loosely related to things like job security or longer-term personal finance planning.

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