Whether it involves remortgages, credit cards, car loans, college tuition, or just extra cash to help pay household expenses and stave off rising inflation, money is more difficult to come by and will be increasingly scarce as the year progresses.
According to the Telegraph, lenders have an estimated £505bn of bad credit loan (sub-prime) liabilities on their books. To solve the problem, banks are offering to sell these damaged assets cut-price. But they are willing to lend investors the money to buy them. In other words, the banks are providing new debt for the old debt they no longer want. It does not take a degree from the London School of Economics to realise that such logic makes poor financial sense, and when banks throw good money against bad money, it is a sign that things are getting worse, not better.
What is driving this ongoing crisis? Several factors continue to batter the markets as they conspire to create a "perfect storm" of financial trouble that is washing ashore from its port of origin, the heavily plagued USA.
Now oil sells for around $145 a barrel, and Iran has threatened to close the Straits of Hormuz. That would cut off a quarter of the world's oil supply and bring the global economy to its knees.
One industry report predicts that within the next two years credit card companies will have withdrawn more than $2 trillion in credit previously extended to cardholders.
Prices for new-build flats were selling early this year at auctions for 26 per cent less than the original purchasers paid. Now economists predict that they will as much as 45 to 50 percent before they hit bottom.
The Guardian reports that £42bn was withdrawn by homeowners last year, but the figure looks set to fall this year as the impact of the credit crunch continues to push up mortgage rates and restrict the number of large loans on offer.
When stalwart banks have trouble with their own credit and borrowing ability, consumers know that they are really in deep trouble. The way lenders shore up their own leaking purses is to tighten credit, enforce strict loan regulations, and essentially withdraw credit that consumers have grown to depend upon and expect. But in the USA, for example, hundreds of thousands of consumers just got official notices to inform them that their lines of credit - for everything from mortgages to equity loans to basic consumer credit cards - have been revoked.
The rules are changing in the middle of the game, and lenders are interpreting the all-important credit score numbers differently now that things are going badly. So many people who had good credit a few months ago are now considered bad credit risks. With weaker credit comes an inability to borrow, especially at reasonable rates of interest, so the coming months spell doom and gloom for a growing number of UK consumers.
Luckily for them, providers of loans for bad credit - who were in business many years before the current credit crisis started - are standing by their promises to provide good loans to those who happen to have bad credit. They were not so popular a couple of years ago, because mainstream banks were practically giving money away for free. But now that those conventional lenders are back-peddling and closing their doors - and vaults - to many customers, providers of loans for bad credit are stepping into the limelight as a legitimate loan alternative.
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