Dangers Of GMAC Loans

With the recent bankruptcy filing of General Motors, many individuals who have GMAC loans are finding themselves anxiously awaiting any potentially negative news about their home or auto loans. However, in many cases a GMAC loan is no different from any other loan, provided the lender is stable and well funded.

Originally, GMAC was a division of General Motors and they largely provided loans to individuals who were purchasing a new car from a General Motors dealership. In many cases, people who were buying a new car felt safe and secure in going directly through the dealership to arrange financing for their new car.

However, in 2006, GMAC was sold to an outside finance interest and was no longer part of General Motors. Part of the reasoning behind this move on the part of General Motors was the that finance arm of their organization had branched out to lending other than the auto industry. Also, corporate leaders were attempting to focus attention back on the automotive industry and serving their customers rather than becoming mired in what was to become the housing credit crisis.

In late 2008, GMAC was given approval to become a bank holding company and became part of Ally Bank, making them eligible for government help in the form of TARP (Troubled Asset Relief Program) funds. This government assistance allowed GMAC to improve its consumer deposits to a stable and secure level.

One of the large criticisms in the past has been GMAC's willingness to provide auto loans to consumers at very low or no interest loan rates. With the recent government bailout of General Motors, many financial analysts and economists have been alarmed to see new advertisements that have returned to these loan interest rates. In many ways, it has seemed that General Motors has been making a desperate attempt to draw buyers back into the showrooms in order to stimulate sales.

However, even though these advertised rates have been through General Motors dealerships, the financing is through GMAC, which is not owned by General Motors. In large part, risky loans are being taken on by GMAC and not by General Motors.

For the consumer, the largest danger to a GMAC loan is the stability of the GMAC finance company. This issue was addressed in December 2008, when GMAC was allowed to become a bank holding company.

Currently, many consumers have concerns that stem from the news that General Motors filed for bankruptcy. However, these activities have little to do with GMAC loans and the terms of the bankruptcy stand to minimize any exposure that might occur to GMAC from its former connection with General Motors.

Until 2006, GMAC was the finance arm of General Motors. GMAC not only provided loans for car purchases, but also for the purchase of homes. With the removal of General Motors as the parent company of GMAC, GM limited its liability for loans extended by GMAC. In late 2008, GMAC was granted permission to become a bank holding company and joined with Ally Bank, making it eligible for stabilizing TARP funds.