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The Origins of Today’s Credit Boom
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go to : MONEY SAVING TIPS & IDEAS - SEARCH ENGINE
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Nowadays it is far too easy to fall into debt and getting out of it, debt that is, is like trying to lose weight, near impossible. Once you have got it it’s so hard to get out of it, if not impossible.
And in today’s fast living fast moving society, offers of loans and credit are absolutely everywhere you look encouraging you to buy that item you have always wanted, immediately, rather than saving and waiting for tomorrow.
My own recollection is from my childhood, when in the 1960s it was virtually unknown to be in debt. People then generally rented their homes and lived week to week on their hard earned weekly salary or other income.
There were home owners with mortgages, but in those days these were few and far between.
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Society was not suited to buying without paying for it by using borrowed money. If there were loans, they would be very short term, maybe for a special event or ocsassion, such as Christmas or a holiday.
Following on from the Second World War and the hardship that it created with subsequent rationing, not only during the war years, but in some countries well after the war, certainly into the 1950s, people lived frugally. They were happy, but people generally preferred to spend what they earned as they earned.
Banks and other lending organisations recognised that there was tremendous potential to make a great deal of money by enticing clients to borrow money to buy that dreamt of item. Live for today, forget about tomorrow. Big time credit was born.
Television and other media advertising sources were also responsible for this vast credit boom.
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People saw the television adverts and it created a general dissatisfaction with what they already had. They wanted new and they wanted it now. Being able to borrow some or even all of the money was the answer. Restrictions on the percentage you could borrow, for example a car purchase, were gradually reduced until during the 1970's in the United Kingdom you could borrow 100%, to buy that shiny new car.
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Also around the same era, credit cards took hold. As I remember Barclaycard were the first to appear back in the 1960s. Whilst not actually being a loan, it did mean that if you could not afford to pay the entire amount of credit at the end of the month, you could postpone making the full payment over several months by just paying a minimum amount.
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There was also the fact that people felt uncomfortable owing money. It was not how their parents or granparents had lived. It took a while to get used to their new found debt but as their relatives and friends fell into the same "trap", it no longer felt odd. It could be talked about and discussed, not such a taboo subject.
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Every avenue that the lending companies could make money from was persued, effectively milking the system, with no regards for the consequences.
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Now it’s not uncommon for students to leave University with not just a degree, but unfortunately laden with debt of somewhere around £25000, which they will have incurred during their college or university education.
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The ex student is then quite used to living in debt and having left University (where most if not all of their friends will also have  similar debts), they carry on in life amassing more loans and greater debts. Good news for the banks.
The crunch comes when the debtor can’t afford to continue with the payments, so they lose their house or their car is repossessed.
Rest assured that the lending companies will have a contingency plan now that the "bad times" have come along. They can afford to have some loans go bad. The good ones will well support these. The banks will never lose out.
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