The sub-prime mortgage crisis that began in 2008 was the catalyst that left many homeowners in foreclosure. It caused the stock market’s downturn, which decreased or wiped out retirees savings; led to the insolvency of banks; and caused the Treasury Department to institute emergency bailouts of banks, major corporations and one very large insurance company in particular which, if it had filed bankruptcy, would have caused a ripple effect that would have devastated the financial markets here and abroad.
Homeowners and individuals who have been caught in this credit trap have had to make major changes in their lives. While recent legislation has allowed for the revamping of home mortgages for those who are in foreclosure, the recession has caused a major effect across the nation and the world.
With unemployment currently at 8.5%, small businesses as well as large corporations have had to make drastic changes in order to survive this recession. As a result, every facet of our worsening economy has had a direct affect on individuals across the spectrum.
We now know that the sub-prime mortgage crisis was a credit trap. It allowed future homeowners to purchase mortgages with no money down and eventually spiraled into a high-interest rate debt that could no longer be managed.
In addition, banks stopped lending and consumers with credit cards faced a sudden increase of higher interest rates even though they had good credit and paid their bills on time. Moreover, student loans and car loans became more difficult to obtain.
Banks raised the standard of lending to consumers and unless an individual had a FICO score of 720 or higher, the chances of obtaining a loan were nil.
Today, this financial crisis has left many individuals struggling to meet their debt obligations. It is no wonder, then, that many are turning to debt consolidation, credit counseling and repair and, in some cases, bankruptcy.
While the events that unfolded over the last year are unprecedented and were a direct result of the sub-prime mortgage crisis, this report will address one aspect of this crisis: credit traps.
We will explore and offer suggestions on how to avoid such traps as: credit cards, mortgages, and loans that affect everyone from homeowners to teens. In addition, we will offer recommendations on how to pay off credit card debt; what to look for when applying for credit, mortgages, or loans; and the resources that are now available due to the government’s intervention.
The good news is that the recession will not last forever. Economists assess that we may see some positive results by the end of this year. In the mean time, we all need to begin the task of paying down the debt we have and avoid incurring new debt, with all its trappings.
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Credit Cards for College Students
Getting Out of Credit Card Debt
How do you increase your FICO score?
