Wells Fargo, hit by the slump in homeowner equity loans, is now offering car equity loans.
Wells Fargo Financial is one of the few lenders that will refinance a vehicle for more than its current value, The Business Insider reports.
Called “Cash Out Refinance Loans,” the deal enables car buyers to use their vehicles instead of their homes as ATMs, getting cash over and above the value of their cars.
Borrowers simply apply for a new loan to pay off an existing loan and get cash at the same time.
According to the American Bankers Association, delinquencies on home-equity loans climbed to 3.52 percent from 3.03 percent in the fourth quarter of 2008, with late payments on the loans jumping to a record 1.89 percent.
Now, with U.S. unemployment officially at 9.5 percent and climbing, banks can expect more delinquencies as bills continue arriving and homeowners no longer have regular paychecks coming, The Washington Post reports.
At the same time, the bankers said delinquent accounts on bank-issued credit cards spiked to a record 6.6 percent of outstanding card debt in the first quarter from 5.52 percent in the fourth quarter of 2008.
More people are apparently using their credit cards, which carry much higher interest rates than bank loans, to meet everyday living expenses now that money from their home equity loans has been spent.
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