Loan Delinquencies Drop

[Apr 9, 2010.]

 

Fewer consumer loans were delinquent in the fourth quarter of 2009 compared with the previous quarter, according to the American Bankers Association (ABA). The data indicate that more consumers are paying their bills and the economy may be improving.

"The fall in consumer delinquencies is a very positive and hopeful sign. Clearly, consumers are shoring up their finances and banks are putting losses behind them. Overall, there is a prudent approach to credit," ABA Chief Economist James Chessen said in a statement.

Personal Loan Payments

Personal loan delinquencies fell to 3.63% from 3.74%, direct auto loan delinquencies fell to 1.94% from 2.04%, marine loan delinquencies dropped to 1.63% from 2.21%, and bank card delinquencies fell to 4.39% from 4.77%. Home equity lines of credit delinquencies fell to 2.04% from 2.12%, but home equity loan delinquencies rose to 4.32% from 4.3%.

Loan Payments and Jobs

Although more people are getting their finances back on track, the ability of people to repay loans is tied to creating more jobs. The U.S. unemployment rate remained at 9.7% in March, according to the U.S. Bureau of Labor Statistics. The number of people who were long-term unemployed, or without a job for at least 27 weeks, rose to 6.5 million, or 44% of people without jobs.

"People are actively reducing their level of debt relative to their income and are rebuilding their savings," Chessen said. "But it's still a very stressful time for many families and this won't disappear until more people have jobs. This will keep delinquencies elevated for the next several quarters."

Tips to Pay Off Loans

So what should you do if you are having trouble paying back a loan?

—Do not avoid your creditors. Contact them as soon as possible to work out some kind of arrangement before it is too late.

—Avoid using loans or credit cards to make additional purchases. Running up more debt is only going to make the situation worse.

—Avoid filing for bankruptcy unless you have exhausted all other options. A bankruptcy stays on your credit report for 10 years and can keep you from getting a mortgage loan, among other things.

Do not get discouraged if it seems like you are never going to get to the other side of your mountain of debt. Some people can pull themselves up by the bootstraps and get their finances in order on their own. But if you need help, find a reputable credit counselor who can help you set up a budget and repayment plan for your loans.

 

About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.