CHICAGO (3/24/14)--Consumers are making mortgage payments before squaring away credit card balances for the first time since 2008, a TransUnion study released last week found.
But car payments remain miles ahead.
As of September 2013, the number of 30-day delinquencies for auto loan payments sat at 0.89%, almost a full percentage-point lower than both mortgage and credit card payments, which sat at 1.79% and 1.86% respectively (TransUnion March 19).
The 30-day delinquency rate in September 2012 for mortgages was 2.42%, while it was just 1.81% for credit cards.
"One of the biggest impacts of the Great Recession to the credit system was its influence on consumer-payment patterns," said Ezra Becker, co-author of the study and TransUnion vice president of research and consulting (MarketWatch March 21). "As unemployment rose and home prices cratered, increasingly more consumers were faced with financial constraints and had to make difficult choices--and many chose to value their credit-card relationships above their mortgages."
That trend appears to be shifting.
But while auto loans have been the most popular for consumers to pay back for more than a decade--a fact some believe is largely driven by the perceived inconvenience of public transit--financial planners say consumers should start ranking their cars below their mortgages as well.
Defaulting on a car loan might mean having to take the bus or the train to work. Defaulting on a mortgage, meanwhile, might put someone out on the street.
"You should pay your home, food and utilities before transportation," Kimberly Foss, founder/president of the Roseville, Calif.-based financial-planning firm Empyrion Wealth Management, told MarketWatch, adding, "If you get kicked out of your house, you have no roof over your head, nowhere to live."