U.S. Federal Reserve Slashes Interest Rates and Causes Surge in Subprime Auto Loans

A special report examines the link between the Fed’s decrease in short-term interest rates and the growing ability of U.S consumers to obtain bad credit auto loans.

Equifax Inc. and Reuters reports that car loans to subprime borrowers in the United States are rapidly on the rise, up by 18% in 2012 from 2011. The subprime auto loans market now services some 6.6 million borrowers and counting. This has been made possible due to the U.S Federal Reserve implementing a policy of quantitative easing in which, since November 2008, there have been three rounds of bond purchases and short-term interest rates have been slashed virtually to zero.

Due to the high-volume sale of subprime auto loans as high-yield securities backed by Wall Street banks and major private equity firms, car loan comparison sites such as LoansForPoorCredit.net are able to help introduce cash-strapped motorists to a wider selection of auto lenders. However, critics of the Fed’s program are quick to point out that in order to compensate for the risk of taking on increasing numbers of higher-risk bowers, some subprime auto lenders seek to charge annual interest rates in excess of 20 percent. Furthermore, Sam Malka, a spokesperson for the site, responded to the findings of the report in the following statement.

“The Fed has made great efforts to help plough money back into the economy from all directions and, as a welcome consequence, the bad credit car loan market is stronger than it has been since before the onset of the 2007 global economic crisis. Although it is true that a minority of subprime car lenders are hedging the risk involved in writing these loans by upping interest rates, most are passing the benefit of the sector’s popularity directly to American consumers by offering lower interest rates, more manageable repayment terms and lower deposits.”

Market-analysis firm Polk supports this assertion as it reports that auto sales have indeed almost recovered to pre-2007 levels, assisted by the Fed’s program and the increase availability of affordable auto loans. The firm calculates that new car, pickup truck and sport-utility vehicle registrations are anticipated to increase by 6.6% this year to a total of 15.3 million, potentially exceeding 2007’s high of 16 million in 2015.


Consumers can compare a wide cross-section of car loans without obligation at: www.LoansForPoorCredit.net

Contact Info:
Name: Sam Malka
Email: Send Email
Organization: Loansforpoorcredit.net
Phone: 305-424-8313
Website: http://www.loansforpoorcredit.net/

Release ID: 12905