Financial Literacy and Car Loans
by Steve Cypher on Thursday, May 14th, 2009More information from the survey conducted for the National Foundation for Credit Counseling shows that there are other areas that come up short in understanding the basics of finance.
Part 2
Yesterday here at Auto Credit Express, we discussed the first part of this year’s annual Consumer Financial Literacy survey that was commissioned by the National Foundation for Credit Counseling and conducted by Harris Interactive. And while we specialize in the automotive sector of the credit reestablishment industry, it isn’t just car loans and a lack of knowledge of the credit bureaus that get many Americans into financial difficulty.
And while most auto lenders place special emphasis on consumer’s past automotive payment histories, there are other financial areas that, if ignored, can also lead to a low credit score (FICO score) and credit rejection. These include a poor mortgage payment history, inadequate down payment and debt-to-income issues. These areas, and more, were covered in the last half of the Financial Literacy report.
Financial Literacy Survey
Here are more excerpts from the topline report of the survey:
Housing:
42 percent of adults, or more than 94 million people, currently have a home mortgage and, of those, 28 percent say that the terms of their mortgage somehow turned out to be different than they expected, including: either payment or terms of loan were different than expected, the interest rate or its duration were different, or they had no knowledge of PMI.
Savings:
One-third of adults (32 percent), or 72 million people, report that they have no savings and only 23 percent are now saving more than they did a year ago because of the current economic climate. Nearly half (48 percent) of Gen Y adults- more than any other age group- report having no savings. Of those with no savings, more than one in four report that, if faced with an emergency, they would charge that expense to a credit card (29 percent) or take out a loan (26 percent), thus adding to their debt load.
Spending:
57 percent of adults report spending less than they were a year ago. However, 45 percent of those now spending less admit that, if their financial situation were to improve within the next year, they would resume their previous spending habits.
Retirement:
One-third of adults (33 percent), or more than 74 million people, do not put any part of their annual household income toward retirement. This is up from 28 percent in 2008.
Insurance:
More than one in 10 adults (13 percent), or more than 29 million people, do not have medical insurance and this number grows to 20 percent among Gen Y adults. Nearly three in four (72 percent) do not have long-term care insurance, including 65 percent of adults aged 65 and older – this is more than 24 million people.
The Bottom Line
Not knowing the terms of a mortgage could lead to unaffordable payments that could blemish your credit score and, worse, cause you to lose your home. An empty savings account also means that there is no money for a down payment on a car or, worse yet, an unforeseen emergency, while spending money that you don’t have will affect your debt-to-income, a determining factor in auto loans and something that can lead to unneeded stress in your life.
Here at Auto Credit Express, we would like to thank the National Foundation for Credit Counseling for commissioning this report and making it available.
