According to a new study, the number of people defaulting on their auto loans is on the rise. And, it’s not just because of the economy. It’s also because of generational differences.
Why are Gen Z and Millennials defaulting on auto loans?
Auto loans are a common form of borrowing for people in their twenties and early thirties. However, this age group is increasingly defaulting on their auto loans. There are a few reasons for this.
First, Generation Z and Millennials may not have as much experience managing money as older generations due to wage stagnation and record-high inflation. They may be unable to afford to make the monthly payments on their auto loans, even if they qualify for the best rates available.
Second, these borrowers may not understand all the terms of their auto loan contract. If they can’t afford to make the regular payments, they might be tempted to walk away from their loan entirely.
If you’re a borrower in this age group and you’re struggling to make your auto loan payments, it might be helpful first to research how to apply for a personal loan and speak with a financial advisor who can help you understand your options and navigate through your debt situation.
Why are defaults on the rise post-pandemic?
There has been much discussion in the media and among experts about why defaults are rising post-pandemic.
One contributor is that many people who were already struggling with debt may have found it harder to keep up with payments post-outbreak, as many jobs were lost or wages were reduced. Additionally, some people may have overspent during the pandemic and now find themselves in a difficult financial situation.
Default rates also tend to increase during times of economic recession, and this appears to be what we are seeing now. Overall, there are a number of reasons why defaults may be on the rise. However, it is important to remember that not everyone who defaults will end up in financial trouble. There are many steps that borrowers can take to avoid defaulting altogether.
How to ensure you don’t default on your auto loan
You can do a few things to help avoid defaulting on your auto loan.
First, make sure you understand all the terms of your contract. If you can’t afford to make the regular payments, try to negotiate a lower interest rate or a longer-term.
Second, be aware of your spending habits and stick to a budget. If you can’t afford to make the regular payments, don’t borrow money to buy items you can’t afford to pay for later.
Third, don’t let your debt become overwhelming. If you’re struggling to make auto loan payments, talk to a financial advisor about options for reducing or eliminating your debt load.
The bottom line
It’s essential to be aware of these issues and stay proactive with your debt repayments. If you’re having trouble making payments, contact your lender as soon as possible.