New figures from the American Bankers Association show that consumer loan delinquencies reached an all-time high during the first quarter of the year. In the terms of the ABA report, a borrower who is at least 30 days behind on payments for any type of loan is defined as “delinquent.”
During the first three months of the year, credit card delinquencies crept up by 0.23 percent to reach 4.75 percent, while unpaid balances on those accounts rose by more than 1 percent to a record high of 6.6 percent.
Meanwhile the ABA said that the composite delinquency rate for all eight types of closed-end loans it tracks – from auto loans to property improvement loans – increased to 3.23 percent.
James Chessen, chief economist of the ABA, said that the still-volatile job market was causing people to fall behind on their financial responsibilities.
“When people lose their jobs, they can’t pay their bills,” he explained. “Delinquencies won’t improve until companies start hiring again and we see a significant economic turnaround.”
Still, he acknowledged that despite the worsening late payment rate, many American families “are taking greater control of their finances” by seeking to cut spending, lower credit card debt and set more money aside for savings.
The ABA advises people who are falling behind on loan and credit card payments to speak with creditors to discuss the range of options available and hold off on charging more purchases.
Although declaring bankruptcy may seem like an answer to debt problems, the ABA cautions that it is “a short-term solution with long-term consequences” that should be avoided if possible.
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