dirty rotten scoundrels

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A shocking fact for you folks - America’s total consumer debt is today over $2 TRILLION, which is more than the GDP of a small country. Every household owes $12,000 on average of credit card debts, without even taking personal loans, student loan, mortgages and any other debts you may have into account! How did we get in this mess?

Well, that doesn’t matter in the slightest now because we are in this mess and will stay in this mess for the foreseeable future. In fact, it is likely to get worse as a result of the financial crisis that seems to be occurring globally at the minute. The sub prime mortgage crash of last year negatively affected the real estate industry all over the world, not to mention how the yo-yoing interest rates affected the banks that are now looking for their profit margins to come from elsewhere. All of this spells trouble for the consumer. In other words, we are all going to feel the crunch sooner rather than later.

There is already evidence of a credit crunch in the UK and parts of Europe so it is only a matter of time. It’s absolutely no use burying your head in the sand though or thinking that it won’t happen to you because it’ll get you nevertheless, and here’s how:

1.We’re all going to be poor

This may sound a little extreme but very few of us will have enough money to be able to live the lifestyle we’ve become accustomed to in the coming months. Inflation is up but wages and salaries have been stuck in rut and will no doubt stay that way for the foreseeable future. As a result, it’s getting more difficult to keep up with bills, especially with no more credit to fall back on and bills to pay. Food, energy, gasoline and any number of other utilities have risen in cost so it’s a fair assumption that the month outgoings will be a little tight when the credit crunch hits.

2. Your credit rating will get worse for no apparent reason

According to some experts, your credit rating could go down for no apparent reason when a credit crunch hits. This is because credit companies and lenders will re-evaluate your credit status in line with their new and much stricter criteria. You’ll get to hear the word “no” an awful lot if you apply for credit and your credit scoring is fair or poor. You may even hear it if your credit scoring is good purely and simply because no lender is obliged to accept you so be prepared to spend time looking for approval.

3. Your house is just bricks and mortar again

Lower house prices is a problem at the time of any credit crunch because people just do not have the ability to keep up with the higher mortgage repayments that are associated with it. The potential negative equity will also be a problem for many, especially if you have invested in property. You stand to lose a lot of money if you do plan on selling any property you own and may struggle to get another mortgage so check out all of the options before setting any plans to move in stone.

4. If you have your own small business then I wish you good luck getting credit

Not only will it be difficult to obtain personal credit, but if you have a small business it will be extremely difficult for you to obtain credit for your business as well. If your records of income aren’t in order or you have had loans in the past then you’ll no doubt be on the hit list for rejection. If this is a result of a credit crunch, which it usually is, it will result in many businesses going bankrupt and start a recession. That in turn will affect us all.

5. Wondering what that $30 charge was on your bank statement? Ask your bank!

Did you know that the incidence of hidden charges has gone up? Banks count on people not to check their credit card and bank account statements every month for a reason. The chances are that you have been charged for using an ATM that you thought was free or for using your credit card to buy foreign currency. There are 101 other hidden charges that can be levied against you as well. With lower profits in recent months, banks will look to hidden charges to re-boost their profits and hidden charges are perfect for that purpose when you’re faced with a credit crunch.

6. Weekly food shopping budget? Yeah right!

As your finances go down the pan, it gets harder and harder to budget. However, when you pair that up with a credit crunch it becomes near on impossible. As the cost of living rises, you’ll find that your budget has to increase in proportion but if you don’t have the spare cash then it can put a real strain on your finances. Of course you could always get a second job to help the cash flow, especially if it means you can afford to eat, but credit is out of the question!

7. Don’t expect help to arrive any time soon

It would be unfair to say that nobody can help you because that isn’t necessarily true, but don’t expect Superman or Spiderman to swoop in and help you because they won’t. As so many people are in debt today, it is impossible for debt management and help to be available to everyone. Charges for these services have also gone up, which kind if defeats the object but you should be prepared to pay for help if you want it.

Just thought I’d warn you!