Nov
28

Consumer Borrowing Decreases

Filed Under Uncategorized 

Last year’s economic recession was mainly due to incessant borrowing and almost unregulated credit lending. One of the major financial sectors affected by the economic downturn was the banking and credit sectors.  A set of banks and creditors did not have any other choice but to erase from their records the bad debts worth around £3.2 million especially on the first and second quarters of 2009.

These sectors have learned from the lessons of the past and many of them have become rigorous and thorough in issuing loans and credit to the public.  Even as news of the economies of the world is starting to recover, a lot of persons in western countries are still finding it tough to obtain loans or refraining from borrowing at all.

As the year 2009 is about to end, finance research and reports show a decrease in consumer borrowing, and with borrowing and lending slowing down, we can expect that consumer spending just right behind. 

The ease over borrowing loans and credits came from both consumers and lenders.  Both consumers and lenders are more careful nowadays because of the consequences involved.  Financially-stable customers prefer to stay safe and settle with what they presently have and choose not to jeopardize their current standing by borrowing unnecessary loans or credit.   Different banks and credit companies, on the other hand, are taking more steps to ensure that they are lending money to individuals who have the capability to compensate.

A lot of loan and credit applications still keep on coming.  Nevertheless, because of harder rules and conditions issued by lenders, it hinders them towards getting a quick loan. 

According to the report of Pricewaterhouse Coopers, £1.5 trillion have been taken down while £230 million has remained for credit cards and personal loans in the UK alone.  Among these, credit card lending has suffered the most since banks required tougher regulations and since the number of consumers getting loans such as debt consolidation loans for the purpose of paying off their previous debt.

It does not take a genius to figure out why this is going on.  Back in the days of easy credit, banks promoted, advertised, and gave off credit cards to people left and right without doing any proper analysis or background assessments.  Unlike today, banks and credit card companies take into account every financial statement of any potential borrower.

Furthermore, the events that lead to the current credit crunch served an important lesson to all.  The most important to keep in mind is that people should only take out loans if they need it and if they will be able pay it in the long run.

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