Another Warning Sign Flashes for Subprime Auto Loans
- Data may show subprime consumers are weaker, Wells Fargo says
- Last decade, slowing credit card payments were early alarm
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Fewer subprime borrowers are paying off their auto loans early, a possible sign that consumers with weaker credit scores are struggling more, according to a report by Wells Fargo & Co. researchers.
Borrowers are making fewer extra payments on loans that were bundled into bonds in 2015 and 2016, compared with loans in 2013 and 2014 bonds, according to Wells Fargo analysts led by John McElravey. The data on prepayments may offer another sign that subprime consumers are having more trouble paying their bills, the analysts wrote in a note dated Tuesday. Borrowers are already defaulting on a growing amount of auto debt.