Credit Crunch USA

An emerging concern in the scenario of the U.S. economy today is the problem of the credit crisis. Credit crunch is a term used to refer to the time when credit became difficult to obtain. What this means in essence that if the majority of the loan applications were approved only half or fewer credit applications will be approved during this period. Currently, the U.S. economy, the markets are in a period of tight credit. This canbecause of inflation and recession and global markets.

In such a state of the credit crisis, the status of the borrower as bad as the banks are reluctant to lend for fear of failure or default. This distrust of bankers and lending institutions leads to increased interest rates so that the acquisition of loans more expensive and therefore more complicated. The credit crisis in the United States has the greatest impact on the housing sector, where loans are generallyapplied for a huge sum caused by the high rates of the real estate market. First time buyers and applicants for jumbo loans find it extremely difficult to provide a stable credit history which is required for the high interest rates.

Moreover during such a period of credit crunch, banks stress on a down payment prior to the issue of loans and this makes it even more difficult for applying loans. While hot shot real estate markets of New York and San Francisco are the most affected by this credit crunch with mortgage loans being hard to acquire, places like Sioux Falls are virtually unperturbed by this phase because of the slow growth in the real estate market. This goes on to show that the location of the properties also play an important role in the acquisition of loans.

As a result of such a crunch period, consumers are relying more on their credit cards to help them acquire these loans. This in turn forces the credit card companies to keep constant vigil on the credit card's activities. With such a situation, the credit limits of the credit card holders tend to go down causing their credit balance to dwindle drastically. Collection agencies are profited by such scenarios and their way of dealing with it is shocking beyond belief. To avoid all this, the credit crunch must be handled effectively by understanding the nuances of the economy and adjusting accordingly.