Hyderabad: As layoffs continue to affect employees across the country, auto finance companies are concerned about the future. Though they have not felt the impact of layoffs yet, many loan managers say they are preparing for a rise in payment defaults.
Several companies, both multinational and domestic, have recently announced large job cuts, leaving tens of thousands without steady incomes. This has put financial stress on many households, especially those with existing loans for houses, cars and two-wheelers.
Sridhar Rao, a loan officer with a major bank in the city, said: “We haven’t seen a major rise in defaults yet, but people are worried. They are calling us and asking for extensions or rescheduling the loans so that they can afford paying the EMIs.”
“A borrower, who was working with a major company, was recently laid off from their company. They were worried that they could default on the payment for a month or two, before they could land at another job. Although the impact hasn’t struck yet, we are presuming it will happen soon”, he said.
Most vehicle loans are taken for a tenure of three to five years, and missing even a few payments can lead to their vehicle being repossessed. This is putting additional stress on borrowers.
Finance companies are now reviewing their approval processes and are closely monitoring customers in high-risk sectors. Kiran, a finance manager at a two-wheeler showroom, said “The company is looking at increasing scrutiny while approving loans for private employees. If more layoffs take place, we have to be cautious with new loans.”
