In America, many people borrow money. This also caused the credit crisis. When issuing a loan, banks hardly check whether the person in question can repay the money. In many cases that was not possible and that led to the credit crisis. It started in the housing market, but has had an impact on the entire economy. The question is whether American banks will improve their lives. Read all about it in this article. Borrowing money is very cheap in America. This is because the Fed, the American federal bank, keeps interest rates low. At one point it even stood at zero percent. That is why it is easy for American banks to lend money. They do charge a certain interest rate for this, but the less interest they have to pay on their loans to the Fed, the less interest they also have to pass on to their customers. Banks also lend a lot to each other.
Borrow money in America
The interest rate is now so low because of the credit crisis, but it is expected that the interest rate will also be very low in the future. There is a somewhat dangerous side to this. The credit crisis arose because banks lend money too easily to consumers. They cannot always pay back these loans, which causes banks to get into trouble again. This started in the housing market, but has had an impact on the entire economy. American banks have started to look more closely at who they grant a loan to, but it is still relatively easy, especially compared to Europe. Ironically, the number of loans may even increase due to the credit crisis. This is because many consumers have run into problems, for example losing their jobs, and therefore borrow money to pay their costs.
In the long term, banks will also have to lend money. It is one of the most important sources of income. The risks will be quite high. In the Netherlands there is a whole system, for example a Credit Registration Office, where the debts of Dutch people are kept track of. The United States does not have such a system. This makes it more difficult for banks to assess the risks.
Spend money with credit card
In the Netherlands, many people pay with their debit card. They almost always do this from a bank account with money in it. In the United States, almost everyone uses a credit card. This means that they buy on demand. They usually pay back that debt quickly, but now that the entire economy has collapsed, this is difficult for many Americans. In addition, most have multiple credit cards, so the debt is even greater. Since the credit crisis, American credit card companies have noticed that more and more people are defaulting on their debts. This also has consequences for the creditworthiness of these companies. They get into trouble because too little money comes in, which in turn disrupts the economy.