From Foreclosure Signs to Auto Repo Lots

[Purveyor]

Easy Credit Gives Way to High Consumer Debt and Defaults

Reina Bolanos got a loan for her used Honda Odyssey in 2006 on what appeared to be favorable terms: $16,000 without a down payment. Though the 8 percent rate was high, Bank of America offered to spread the loan over six years to keep the monthly payments down.

But the secretary from Silver Spring found that raising her young children cost more than she had expected, and she now worries about losing the car after missing her last two payments.

A growing number of Americans are buckling under the weight of debt as the troubles that started among homeowners with subprime mortgages last year spread to other consumers who rely on credit. Auto loan borrowers are having an especially hard time. The number of people more than 60 days late on their car payments has spiked to a 10-year high, according to Fitch Ratings.

Similar problems are brewing for credit card holders. Card balances written off as uncollectible by banks have jumped 24 percent, and late payments are up 16 percent from a year ago.

Like the mortgage market, consumer credit boomed in recent years as lending standards loosened. Unorthodox auto loans lured consumers to buy cars they otherwise couldn't afford. Credit cards teased holders with introductory rates that soared after a few months. Now, more people are struggling to keep up with their bills under the strain of growing job losses and an economic downturn.

Bolanos, 27, has been using her credit card to pay utility bills and buy groceries, even though the card is nearly maxed out. She's racked up $5,000 in credit card debt. With monthly car payments of $400, $1,335 in rent for her two-bedroom apartment and sizable day-care bills, she's overwhelmed. She and her husband, a construction worker, earn a combined $50,000.

---EOE---

http://www.washingtonpost.com/wp-dyn/content/article/2008/02/17/AR2008021702487.html

[SpiralHawk]

1. "Don't worry, we republicon homelanders are in charge. Smirk." - Commandr AWOL

"You can rest in the comfort of knowing that (smirk) the economy is surging (for republicon homelander oil & munitions fat cats), and we are watching out for our own best interests (smirk, smirk, smirk.) Another round of PERMANENT tax cuts for the wealthy should, um, a, d'oh, tickle-on down eventually and solve these insignificant little prole problems you all are having. Now shut up and sit down. Smirk."

- Commander AWOL

[davsand]

2. My Ford Escort Wagon cost me $1300 and I wrote a check for it.

It isn't pretty, but it runs and it is paid for--does ok with gas too.

I'm not smacking on her, but you can buy a used car for a lot less than $16,000. There are NEW cars that sticker for less.


Just saying...


Laura

[KansDem]

12. I drive a 43-year-old Chevy

It isn't pretty either, but it gets me from Point A to Point Z and all points in between. I'd like to have a newer car some day, but can't afford it right now.

Ask me next year, and chances are I'll tell you I'm driving a 44-year-old Chevy...

[Warpy]

13. There are probably cheaper apartments out there, too

although she might have missed the boat on that one. Most places have waiting lists for apartments now, thanks to the escalating number of foreclosures. Still, Silver Spring is a ritzy suburb. She could do much better in slumburbia like College Park or Riverdale.

I didn't pay cash for my old Ford Ranger, a truck I bought used and pre battered and drove for 14 years until it was old enough to vote, but I was trying to establish credit in this town so I could buy a house. I did, and I did, and I paid that loan of early, as soon as the ink on the mortgage agreement was dry.

These people sound like Trendies, people who bought into lifestyles they see on HGTV and other lifestyle porn outlets. What they really needed to do was look at their income and budget accordingly. $50,000/year anywhere near DC means a crummy 2 bedroom apartment in an unfashionable area, good used cars with decent fuel efficiency, and learning how to cook. It means hand me down and thrift shop furniture. It means struggling to save, not pay off credit card debt and car loans.

Let's hope they figure it out before they're dragged under by debt.

[Speck Tater]

3. We live in a culture of greed where everyone believes...

... that they "deserve" the newest, biggest, fanciest car whether they can afford it or not. 4 years ago I paid $100 cash for a car that was already 12 years old. I've driven that car for 4 years now, and never had to make a single car payment. And as a light sub-compact, it gets great gas mileage.

People's whole concept of the value of money has been so badly warped and distorted in the last 40 or 50 years that most modern adults have lost all touch with reality. So I find it difficult to blame it all on the providers of easy credit. Banks can only scam people who are greedy to be scammed. Just as any con man knows he can only con someone who is already greedy.

[Romulox]

5. Yep. 99% of all scams play on the mark's GREED. nt

[Romulox]

4. Poor dear can't make her Honda payment! Time for a taxpayer bailout!

:sarcasm:

[fed-up]

6. SIX YEAR auto loan?-my only new car-Honda Civic $5995- 1984 -3 year loan- last car cash $850 nt

[madinmaryland]

9. Based on her payments, she must be paying 20% APR.

Talk about highway robbery. :wow:

[TreasonousBastard]

7. 50 thousand before taxes, and...

they've got 21,000 of it going out in rent and one car. Then there's the other car, insurance on the cars, utilities, food... 50 grand ain't shit any more. It ain't even the median family income any more.

And this situation isn't new at all. Years ago many women found that they better be making a LOT of money at that job or they're losing money. Transportation, clothes, makeup, lunches, daycare, higher joint tax bracket... it can add up to more than you make. And that was before gas and housing went through the roof.

Also years ago-- if both worked, the smart couples paid the bills with the bigger paycheck and put the smaller one into savings. And didn't buy minivans on credit.

Some old lessons are being relearned.

[here_is_to_hope]

8. Zero sympathy for any one who cant make it on 50k a year...

We are a family of three doing just fine on 31k a year.

[pitohui]

10. yes, a six year loan for a USED car is certainly unsympathetic

however, it bothers me that the media always finds the stupidest, most unsympathetic person that they can to feature in stories like this

we all know people who can't meet their bills because of a medical crisis and ended up in bankruptcy to save their house/car from being repo'd -- why don't the media look up some of those people

who cares if the stupid people get repo'd and have to buy a car that they can actually afford, but we all care and we are all affected when people try so hard and lose everything anyway because they can't pay exorbitant medical costs after cancer or serious injury

[coalition_unwilling]

11. I suspect her day care bills may be prohibitively high. It's a mystery

to me why Scandinavian countries offer 100%-paid government run daycare centers (after mothers get the first 6 months after birth at 100% paid maternity leave) and America with its vastly greater riches does not.

Something about a defense budget of 550 billion a year (plus supplementals for our adventurisms in Iraq and Afghanistan) may have something to do with it, ya think?