Loan Delinquency Rates Rise - First Quarter 2007
The American Bankers Association has reported that delinquencies are up on all loans. The rate of delinquencies rose from 2.23% to 2.42% which is a whopping 10% rise. According to James Chessen, ABA's chief economist, "the slow job growth, falling home prices and weak economic growth helped to worsen consumers' financial position overall." Chessen also stated that "there are still signs of consumer financial distress, which will continue throughout most of this year as the worst of the housing problem works its way through the economy. The increase in the first quarter of 2007 was driven in part by double-digit increases in home-equity loan delinquencies," Chessen said.
The first quarter composite ratio found the following:
Surprisingly, credit card loan delinquencies declined the first quarter of 2007, according to the American Bankers Association's Consumer Credit Delinquency Bulletin. Late payments on credit cards were 4.41 percent of all accounts in the first quarter, compared to 4.56 percent in the fourth quarter of 2006 (seasonally adjusted). The rest of the numbers are not as promising:
• Home equity loan delinquencies increased to 2.15 percent from 1.92 percent
• Property improvement loan delinquencies increased to 1.61 percent from 1.29 percent
• Indirect auto loan delinquencies increased to 2.73 percent from 2.57 percent
• Direct auto loan delinquencies decreased to 1.68 percent from 1.85 percent
• Personal loan delinquencies increased to 2.08 percent from 1.91 percent
• Mobile home loan delinquencies increased to 2.94 percent from 2.82 percent
• Marine loan delinquencies increased to 1.41 percent from 1.33 percent
• Recreational vehicle loan delinquencies increased to 1.03 percent from 0.96 percent
The ABA advises consumers to review their finances often and watch for the warning signs of being overextended on credit:
• Paying only the minimum payment month after month
• Being out of cash constantly
• Being late on important payments, such as rent or mortgage
• Taking longer and longer to pay off balances
• Borrowing from one lender to pay another
For those who are having trouble paying down their debts, ABA advises consumers to take action to solve debt problems with the following tips.
• Talk with creditors — hiding only makes the problem worse
• Don't charge more purchases until your problems are solved
• Avoid bankruptcy — it's a short-term solution with long-term consequences
"It's important that consumers who are having trouble meeting their financial obligations contact their lender immediately," Chessen said. "Lenders are willing to work with borrowers during periods of financial stress, but ignoring the problem only makes the situation much worse."
