Traditionally lenders have considered an applicant’s entire credit history when it came to deciding whether or not they should approve a loan. However, this practice may be coming to an end. In fact, some new and used car auto loan providers are going so far as to actively pursue those who have fallen behind on their mortgage payments.
Although at first glance, giving auto loans to people with bad credit who have failed to make timely payments on their homes may seem less than wise, some auto lenders feel that they simply have to broaden the base of those they give loans to in order to survive. Ally Financial Inc., General Motors Financial Co. and Mitsubishi Motors Credit have all come to this conclusion and are partly responsible for the 205,000 auto loans that were issued in the first three quarters of 2011 to borrowers with credit histories showing that they were at least 60 days late on their mortgages or have even experienced foreclosures. Though, overall this number is not a huge number, it is a drastic increase from the approximately 80,000 that were made during the same nine months in 2006.
What is huge is the potential market of borrowers that this segment of borrowers represents. Equifax Inc and Moody’s Analytics estimates that there are nearly 7 million people who are 90 days or more late on their mortgage payments. Experian Vice President Michele Raneri said, “[Lenders] are coming to the table and saying: ‘How do we work with the new economy and consumers being late on their mortgages?’ They know they need to grow…and they know they have to be flexible.”