Auto lenders going after subprime borrowers

April 11, 2012 12:00 AM

Part of the cause of the economic downturn was the practice of subprime lending, which most analysts agree got out of control in the mortgage industry. Banks and other financial institutions offered easy loans and mortgages to those with less-than-stellar credit, but this led to a string of defaults that not only bankrupted homeowners but also left the major corporations without repayment for their loans.

New federal regulations have curtailed the practice in the mortgage industry, but The New York Times reports that auto lenders are beginning to court customers with bad credit scores once again. These borrowers pay high interest rates and often rack up late payment fees, but they're also at the highest risk for default - something that hurts both the borrower and lender.

"It's clear that we are returning to business as usual," former Federal Reserve bank examiner Mark Williams told the news outlet.

Drivers who want to avoid taking on a car loan again may need to hang on to their current vehicle. Investing in auto maintenance and taking care of any car repairs that pop up can help owners keep their cars on the road.

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