Credit Crunch Loan Sharks Warning
If any of you are old enough to remember the effects of the last major recession in the late ’80s and early 90’s, you will recall that with the collapse of stock market prices in 1987 even greater than the ‘great recession’ of the 1920’s. For several years after, personal savings, along with many stock-market related investments, suffered badly, leaving many families very short of cash.
In the UK this recession not only sent house prices tumbling, but also inflation, which had been running at around 4.2% in 1987, climbed to over 9.5% in 1990. People’s savings were hit in every way conceivable because of this.
So many families ended up being out of pocket for many of the essential of life, including food, turned to the ‘doorstep loan shark’ for instant money, not realising the draconian penalties that were attached to many of these loans. Interest payments sometime greater than 100% were being charged, and sometimes enforced by men in black wielding baseball bats.
But those days had long since gone forever we thought, especially with the advent of buckets of ‘cheap’ money being offered to the consumer from every angle, whether from high street banks, credit card companies virtually forcing you to take on 0% interest rate credit cards, and low interest refinancing on your own home … or so we thought.
Now with this global credit crunch happening in a deeper and more threatening manner squeezing the very liquidity out of main stream banks, facilities like 125% mortgages on homes have disappeared, first time buyers are going to have to stump up bigger and bigger deposits, and more and more credit card companies are cutting back on your card spending limit, or in cases like EGG, cancelling well over 100,000 credit cards.
With this lack of liquidity between banks means that more and more consumers are being squeezed out of any available mainstream credit and this foretells the return of the doorstep lender, with interest rates around 100% in many cases.
Now in the UK at least this in itself is not illegal, believe it or not, but the trouble will come when authorised ‘friendly societies’ that offer a genuine helping service to people in need will get mixed up with the old-style loan shark, with ludicrously high interest rates (100% or even more), plus all sorts of nasties if payments are not made on time.
The moral of the story has to be that increased indebtedness is going to be more prevalent over the next few years, but you should really look at your options carefully - even bankruptcy, rather than fall into the clutches of these parasites that will bleed you dry.
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