Learning
From The Credit Crunch: Important Lessons For Borrowers
There are lessons to
be learned from the current worldwide credit crunch. This is a wake up call for
millions of people relying heavily on credit to obtain goods and services they
actually cannot afford. It has been no secret that
living off credit cards has become a way of life in recent times. Very few people
over the age of eighteen do not have at least one card, and most people have three
or more that they use on a regular basis. The days of plastic being security for
times of emergency have long been forgotten, but with the credit crunch we face
today it is time to revisit those times. The fact that
everyone owns a few credit cards and think nothing of using them for luxuries
they do not have the money to buy, is the result of ultra loose lending practices
that spread easy credit around like lice in a schoolyard. Most people do not hesitate
to use a credit card for everything from clothing and shoes to cars and home remodeling.
Saving up money and waiting until you actually have the
money to purchase the things you want has become unheard of as people have grown
used to living well beyond their means. But now we find ourselves in the midst
of the credit crunch and unless we learn a very good lesson it is only bound to
happen again. The credit crunch lesson is very simple:
you can only live off the generosity of a bank for so long before the entire framework
of easy money collapses from the bottom up. The reason
so many people have been able to get thousands of dollars in debt over the past
years is due to unusually loose lending practices on the part of banks and other
lenders. For example, the first thing college students are offered when they turn
eighteen and leave home are credit cards with high limits, and they are even lured
with free gifts just to fill out an application. These students often do not have
jobs or any other signs that they can actually pay off these cards, yet they are
waved in their faces like candy. This is just an example of loose lending practices
that eventually lead to the credit crunch like the world is currently facing.
Living off of credit is now going to be a lot harder,
at least for the near future. Those who have over-extended themselves well beyond
what their income allows them to pay back will find it near impossible to secure
anymore loans. Even people who have always paid their bills on time may find their
credit limits reduced and may struggle to secure future loans due to very minor
flaws on their credit. This is not a punishment, but a wake up call courtesy of
the credit crunch. It's time to learn the lesson that
the banks are learning as they struggle to regain security through federal bailouts.
A nation of people living beyond their means on borrowed money that they may or
may not be able to repay is not sustainable in the long run. The system will collapse
when too much bad debt falls through, leaving even the largest financial institutions
on shaky ground. It's time to go back to the old
times where you saved money for the things you wanted, and needs came before dreams.
The credit crunch is a huge shake on the shoulders for anyone willing to listen
and take the lesson to heart.
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