Late Payments on Loans

May 27, 2008

A shocking sign of the weakening economy came in a report recently. The report shows that consumers are making late payments at a 16 year high. Most believe this is a direct result of the declining housing market and serves as a sign of growing economic woes in America’s financial institution.

“There’s no question that the economy is weakening beyond housing.” stated chief economist for Moody’s Investors Service, John Lonski recently.

The American Bankers Association has seen a consentient rise in the number of consumers late with their loan payments by at least 30 days. Loans past due 30 days numbered 2.44% in the third quarter and rose to 2.65% in the fourth. A year earlier this number rested as 2.23%. Many are concerned that the number of delinquent payments will continue to rise throughout 2008 which may intensify a recession should one occur.

Recession is a negative economic growth in a country. Identifying the exact point of a recession is difficult but most experts believe that the United States in not yet in a recession. However, many financial experts will agree that a recession is on the horizon if the current credit crunch and financial hardships continue.

Many experts are seeing delinquencies in areas that were traditionally stable in years prior. The rate of delinquencies on auto loans is currently at 1.90% which is the highest it has been in at least 2 years.

Credit cards, which experts agree, are not only causing but are being affected and which are seeing staggering delinquency rates, rising to 4.38%

The reason for these delinquencies can be traced to the lack of growth in the job market and the increase in workers being laid off. With consumers loosing income and the price of necessities such as food on the rise it is becoming harder and harder to make those monthly payments. An expected report that will be released in the coming weeks will state that job losses in March reached 60,000.

However, there are several plans in the works by the U.S government to curb the effects of delinquent payments and the housing slump.

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