| Late Payments Increase Bills |
| By Credit Federal |
Published
01/3/2008
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Financial News
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Credit Card Bills and Loan Debts
It's not a new problem, it just seems to continue growing worse... Consumers spend above their ability to repay. Excessive charges added to already high credit card balances on top of loans that are either long past due or at the edge of late payment.
Let's start with the credit cards... those thin slips of plastic that made purchasing all too easy... the fact that January and February are the busiest months for credit counseling agencies should open eyes.
This is also a worrisome time for the credit card companies. They know that; when push comes to shove, people will pay their mortgage loan instead of their credit card bill. These days, that notion is even more worrisome in light of many homeowners defaulting or already late on their mortgages even after paying those loans ahead of their credit cards.
If you've got a credit card you can't pay, stop charging on it and consider aggressive measures to repay the debt, even if you have to borrow against a car, boat, or get a low or no interest loan from a family member. If necessary, consider a second job and drastically cutting expenses for non-essentials.
Credit card payments should be for more than the minimum, and with any extra money applied to the card charging the highest interest rate. Another strategy is to negotiate better terms with your credit card company. If you've been a good, longtime customer and paid timely, you'll likely succeed.
As for loan debt... late payments cover a range of loans including auto, home improvement and certain home equity loans. The American Bankers Association reported that the delinquency rate on a composite of consumer loans increased to 2.44 percent in the July-to-September quarter. That was up sharply from 2.27 percent in the previous quarter and was the highest late-payment rate since the second quarter of 2001, when the economy was suffering through a recession.
A severe housing slump and weaker home values have devastated some homeowners, making it difficult or even impossible for some to pay their monthly mortgages. Foreclosures surged to record highs and more homeowners fell behind on their payments during the third quarter of last year, according to the Mortgage Bankers Association.
A drop in home prices left some people stuck with balances on their home mortgages that exceeded the worth of their home. Others collapsed when low introductory rates on their mortgages jumped to higher, unaffordable rates.
Late payments on home equity lines of credit jumped to 0.84 percent in the third quarter. That was up from 0.77 percent in the second quarter and was the highest since the final quarter of 1997. The delinquency rate on home equity loans in the third quarter rose to 2.28 percent, a two-year high.
Meanwhile, the delinquency rate on indirect auto loans; which are arranged through car dealerships, jumped in the third quarter to 2.86 percent, a 16-year high.
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