Even a quick glance at the papers or the TV will tell you that we are suffering from what is probably the worst credit crunch in living memory. But, many of the news reports here, whilst strong on details, don’t actually tell you as an individual what living in a credit crunch could mean to you in real terms. Cuts in interest and VAT rates may save you some money on a day to day basis but what other impacts could the credit crunch have on your finances?
Well, for a start, you will find it harder to get credit. In recent years you’ve probably noticed that it has been really easy to borrow money. Most people have been able to negotiate mortgage loans no matter how much (or how little) they earn, it’s been really easy to take out loans and credit card companies have been falling over themselves to get new customers.
Nowadays, however, the picture is very different. Payday Lenders have become much more careful about who they lend money to and the conditions that apply to their borrowing. So, today’s consumer may find it hard to take out new credit at reasonable rates of interest and may even find over time that their existing products have new caps and limits put on them.
It is, for example, unlikely that new borrowers will be able to get on the mortgage ladder without the right salary package(s) behind them and a hefty deposit and the mortgage deals on offer will not be as good as they were just a year ago. And, getting a personal loan or a new credit card is becoming increasingly harder.
Another impact of the credit crunch is job security. We have already seen some major names in trouble due to the faltering economy and this is likely to get worse not better at least in the short term. So, a lot of people could potentially lose their jobs and could find it very hard to get new ones.
The major problem here is how to service existing debts such as a mortgage and other borrowings without an income to do so. It is anticipated that many people could find themselves in severe financial difficulties here as they have borrowed so much in the good times that preceded the credit crunch. It is likely that the number of home repossessions will continue to rise.
But, all is not doom and gloom and the government are taking measures to try and combat the effects of the credit crunch. And, there are measures that you can take yourself to try and minimise the effects on your own life. The most obvious one here is to be careful about what you spend your money on.
Up until this year most of us have lived on a ‘spend today, pay back tomorrow’ principle. Now we should be looking more at a ‘spend today, pay back today’ attitude. It is also recommended that you pay off your debts as quickly as you can or at least keep them at manageable levels. This way, if something does go wrong with your finances, you’ll have a better chance of keeping your head above water.
Making a budget (and sticking to it!) is a good way of working out where your money goes and where you can make savings if you need to. So, if you don’t already have a budget in place then think about doing one now. Finally, if you are worried about your debts and how to manage them in the credit crunch do try and take advice early to see what your options are. You may not need to act now but it will be useful to know where you stand and what your choices are if the worst does come to the worst. The following organisations can give you free and experienced advice that could be useful in this scenario: