Credit Crunch

There is currently a global financial crisis, commonly known as the ‘Credit Crunch’. The Credit Crunch is placing great strain on national and international financial markets. As the Credit Crunch takes hold, it becomes harder for businesses and individuals to find affordable finance. In the case of businesses, this can lead to redundancies or even the failure of the company. Consequently, this can lead to individuals incurring further debt as they lose their sources of income. Financial institutions are showing less interest in lending money, resulting in rising interest rates for finance products as well as a reduction in the availability of mortgages and loans.

The credit crunch has left businesses financially stretched, pushing them to strategically restructure their debts. A few of the credit crunch solutions that are relevant at a time of financial crisis include:

• Maintaining a good credit score is important for riding out a financial downturn. Paying off your credit balances can help to improve your credit score.
• If you are struggling to make your payments, speak to your creditor. While it is unlikely you will be able to get a significant amount written off, they may be accommodating in waiving charges or freezing interest for a short time until your financial situation improves.
• The credit crunch has prompted credit card issuers to restrict their lending criteria. Switching to a lower-rate card is thus more difficult at the moment, however if you have a good credit history, may not be impossible. Try to avoid applying for multiple credit cards in a short period of time as you will adversely affect your credit score.
• Avoid using store cards. They are typically restricted to a particular chain of stores, have low credit limits and high interest rates. If the purchase is totally necessary, it is better to pay on a credit card, or even better, cash.

If you are unable to find a feasible credit crunch solution, it is worth speaking to a financial advisor or credit crunch expert. They can analyse your financial situation and advise you on the best course of action.