Working in the debt industry for a number of years, it was easy to predict that there was going to be a collapse in how the financial market was running.
We were crying out a few years ago about how "Great Britain smashes though the 1 Trillion pound barrier in debt", and although it hit the headlines, still, no one took notice.
It is only today that we hear our Governments talking about things that caused the financial crisis rather than talking and taking action when things could have been prevented or at the very least reduced the affect it would have on people all over the world.
Instead, we were allowed to carry on borrowing money we couldn't afford and house prices were still rising to unaffordable levels making it almost impossible for people to purchase a property.
So where did inaction leave us? It left us in negative equity and people out of work.
It left people facing a reduction in the income, redundancy and repossession.
It is difficult to know exactly who was at fault, and the borrower cannot be exempt from some responsibility either, but how did we get into the trend of borrowing instead of paying for things in full when we needed them? We can pinpoint everything as there are too many variables involved, but it has been a few years now since the cries began on calling out for tougher regulations on the lending systems.
Debt is a massive factor in the downturn of the economy.
Loose lending terms have resulted in people borrowing what they cannot afford to pay back as well as high interest rates being relied upon by banks and lending companies to make a profit on the moneys they lend out.
If interest is relied on so much and a large percentage of what has been lent out cannot be repaid by the initial lending agreements, it was likely that the creditors would freeze the interest on an account to enable someone to repay what they borrowed, but by doing that, there was no profit to be made.
I guess they got back what they lent out, but with no profit, there was no gain.
Freezing interest on repayments is not the only factor, but taking into account the amount of debt that would be written off, would also mean there was less money to go around.
Placing this on a larger scale, such as mortgage lending, if people find themselves in a position where they cannot keep up their mortgage payments and the house got repossessed and sold at auction, there is a loss on the property rather than a gain.
These are just some of the factors that added to the downturn in the economy within the debt industry, this doesn't take into account other financial sectors, however, it does show a lack of restriction when it comes to deciding who is a risk and who isn't when borrowing money.
It also shows us as borrowers that perhaps we were not as educated when deciding whether or not a loan or mortgage would be affordable should something happen which left a reduction in our income.
We didn't plan for what was around the corner, but then again, the credit system didn't really know our financial commitments before they decided to give us money.
This means not only is there a lesson to be learned for us in the way we borrow, but also there is a message to the lenders and Government to create a lending system that does take into account what we have to pay out in relation to our income to see if we really can afford to take on more borrowing.
We are not all as financially educated as we would like to think, but perhaps one positive thing that came out of the credit crunch, is that we watched the bubble burst which made us realise we have to look after the money we do have more wisely.
We were crying out a few years ago about how "Great Britain smashes though the 1 Trillion pound barrier in debt", and although it hit the headlines, still, no one took notice.
It is only today that we hear our Governments talking about things that caused the financial crisis rather than talking and taking action when things could have been prevented or at the very least reduced the affect it would have on people all over the world.
Instead, we were allowed to carry on borrowing money we couldn't afford and house prices were still rising to unaffordable levels making it almost impossible for people to purchase a property.
So where did inaction leave us? It left us in negative equity and people out of work.
It left people facing a reduction in the income, redundancy and repossession.
It is difficult to know exactly who was at fault, and the borrower cannot be exempt from some responsibility either, but how did we get into the trend of borrowing instead of paying for things in full when we needed them? We can pinpoint everything as there are too many variables involved, but it has been a few years now since the cries began on calling out for tougher regulations on the lending systems.
Debt is a massive factor in the downturn of the economy.
Loose lending terms have resulted in people borrowing what they cannot afford to pay back as well as high interest rates being relied upon by banks and lending companies to make a profit on the moneys they lend out.
If interest is relied on so much and a large percentage of what has been lent out cannot be repaid by the initial lending agreements, it was likely that the creditors would freeze the interest on an account to enable someone to repay what they borrowed, but by doing that, there was no profit to be made.
I guess they got back what they lent out, but with no profit, there was no gain.
Freezing interest on repayments is not the only factor, but taking into account the amount of debt that would be written off, would also mean there was less money to go around.
Placing this on a larger scale, such as mortgage lending, if people find themselves in a position where they cannot keep up their mortgage payments and the house got repossessed and sold at auction, there is a loss on the property rather than a gain.
These are just some of the factors that added to the downturn in the economy within the debt industry, this doesn't take into account other financial sectors, however, it does show a lack of restriction when it comes to deciding who is a risk and who isn't when borrowing money.
It also shows us as borrowers that perhaps we were not as educated when deciding whether or not a loan or mortgage would be affordable should something happen which left a reduction in our income.
We didn't plan for what was around the corner, but then again, the credit system didn't really know our financial commitments before they decided to give us money.
This means not only is there a lesson to be learned for us in the way we borrow, but also there is a message to the lenders and Government to create a lending system that does take into account what we have to pay out in relation to our income to see if we really can afford to take on more borrowing.
We are not all as financially educated as we would like to think, but perhaps one positive thing that came out of the credit crunch, is that we watched the bubble burst which made us realise we have to look after the money we do have more wisely.
Source...