Most Americans need a car, but not all can afford one. This is where auto loans come in, and in recent years, the market for risky sub-prime loans has skyrocketed. In November, the number of such loans reached a 10-year high, and they now make up a quarter of all car loans.
There are a few reasons why sub-prime loans are bad news. For one, they carry an average interest rate of 19 percent. Lenders target consumers with bad credit, lots of debt and even those who have just declared for bankruptcy. One in three of these loans default, and the average default time is only seven months after the loan was taken out. Once a loan defaults, lenders can repossess the car, keep your down payment and may even charge you more if they deem the car’s value has decreased.
john oliver
newsweek
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