Subprime auto loan approvals have been on the rise over the past few years. While this bodes well for consumers and the economy, analysts warn that trouble may be on the horizon for people with significant student loan debt when the time comes for them to purchase a vehicle. Specifically, analysts say that an influx of customers with considerable student loan debt may create a “cooling off” period in the subprime market.
Credit Scores Can Suffer
A recent TransUnion study shows that more than half of student loan accounts are in deferred status. The study also reports that student loan balances increased by 75 percent between 2007 and 2012, with individuals taking out student loans posing a significant risk of default. FICO’s chief analyst Andrew Jennings states, “As more people default on their student loans, their credit ratings will drop, making it harder for them to access new credit and help grow the economy.” Jennings goes on to say, “Even people who stay current on their student loans are dealing with very large debts, which reduces the money they have to spend elsewhere.”
The high delinquency rate and increasing amount of student loan debt is something for lenders and dealers alike to keep their eyes on, while consumers need to keep in mind that student loan debt can greatly affect their chances of qualifying for an auto loan. For now, borrowers with significant amounts of student loan debt who are considered to be subprime candidates are successfully securing vehicle financing through subprime lenders or buy here pay here dealers. Analysts warn that this trend may not continue as student loan debt becomes more and more of a problem.
Auto lending companies such as BlueSky Auto Finance are fully integrated with banks and lenders who specialize in providing subprime auto loans. If you find yourself saddled with student loan debt, and are worried that you may not qualify for an auto loan, BlueSky Auto Finance may be able to help. When you apply for financing through the BlueSky website, you will be notified immediately if you have been approved for an auto loan. For more information in applying for auto financing through BlueSky Auto Finance click here, or call us at 1-800-BLUESKY.