How the Banking Crisis Affects You

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Do you think you are immune to the Banking crisis? Think again. It is going to impact on you directly and indirectly in a myriad ways. The only way to avoid getting drawn into the consequences is to eliminate debt.

Take for instance the value of the pound. Ever since the banking crisis has hit the UK, the value of the Pound has been declining versus the US Dollar, the Euro and the Japanese Yen. This means that the purchasing power of the Pound is declining because of the Banking crisis. There are two ways in which this will affect you: Eventually rising inflation will erode your net worth or your savings will go down and there will be a rise in prices because of inflation. But your problems will not be resolved unless you make a conscious effort to eliminate debt from your life.

You must have noticed that since the financial crisis, Banks have stopped lending to each other. This is because of mistrust between the banks which has resulted in a lack of liquidity. Banks are becoming risk averse, which is an irony because the Banking crisis has been precipitated by excessive risk taken by Banks because of their insatiable greed. But this is not going to help you as an individual. Actually the reverse is happening. Banks are forcing individuals to accept higher interest rates by coercion, some credit cards now have interest rates as high as 56%, when they were at just 17% 3 years ago (Source: American Express bill). They even justify this by stating that the risk perception has become higher.

Some of the banks are convincing customers to convert their unsecured loans into secured loans and mortgages. We must be ever vigilant and not fall into this trap. We are liable to lose our homes and property by doing this. The best way out is to eliminate debt altogether.  Most of us are unaware of the laws which have been enacted to protect the customer against unethical practices of Banks and financial institutions. It is advisable to seek help from professionals who can guide you through the financial landmine.

Another dimension of the Banking crisis has been the increase in interest rates on unsecured debt. Though there is no logic which drives this decision, we must remember that Banks have shown themselves to be avaricious by nature and ever on the lookout for reasons to increase lending rates. The Banking crisis therefore comes in handy as a convenient excuse to hike the APR. The reason given is that the risk has increased and they have to cover it by increasing the lending rates. Obviously your debt will rise in proportion to the interest being charged by the Banks. The only way to escape from the draconian clutches of Banks is to become debt free. The earlier we become free of debt the better since the days ahead are likely to become financially unbearable.

Another interesting development which has been a direct outcome of the financial crisis has been that Banks have stopped lending to each other. Why should that be? The reasons are obvious. No one really knows the extent to which Banks are exposed to risk .There is a fear that any Bank may go belly up anytime. The problem has become so endemic that even large Banks are not immune from it. Under these circumstances liquidity has been affected. Banks are therefore trying to increase revenues from loans by innocent individuals like you and I, by using coercive tactics. Many of us simply cave in and succumb to pressure. It is important to get out of debt, and this is best achieved with the help of professionals.  Remember, Banks are not in business for the benefit of their customers, they are there to extort as much money from you as possible, they call it business, others call it usury. You must eliminate debt quickly to escape the deepening Banking crisis.

Source by Chris J Ball

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