The Bad Debt Debate

There is a current bad debt debate going on in the US about people who got loans that they would not otherwise been able to afford. This has been attributed to the cause of the current credit crunch in the US. Banks have given loans for houses to a lot of people who should not have really gotten those loans and as a result many of these loans or now in default. Of course many people think this has just started happening, but its not really true. I know when I bought my house 12 years ago, I was pre-approved for a lot more money than I thought I could afford. When I looked at the amount of some of these houses, I almost decide to buy a 400 thousand dollar house, which I could have made the payments on, but it would not have given me any wiggle room in case I had un-expected expenses. This concerned me and I made a decision to go with a much cheaper house. Now during the past twelve years I’ve had ups and downs with my finances. Last summer my gas bill doubled and as a result the increase in other consumables such as groceries. I made the right choice, but it seems like a lot of people did not make the right choice and now we find ourselves in this mess.

There was a time when lenders use to see bad credit holders as potentially risky customers to lend money to. But with the increasing number of people having poor credit, lenders started seeing a huge potential of market in there and came up with financing plans especially for adverse credit holders. 

A person can get bad credit tag due to defaults in previous debts, arrears, declaration of bankruptcy, CCJ etc. it means that credit rating of that person is below 620 which is not seen as a good one in loan market. But loans for bad debt have totally reversed the situation enabling bad credit holders also to secure cash when they need it. At least that was the case, but now the lenders are changing their mind since most of them are now bankrupt and trying to obtain government loans or government grants in the form of the stimulus bill to bailout these financial institutions. So what we have here is the people who followed the rules are going to pay for the people who did not. I don’t see this as a correct way to do things.

I am in danger of losing my job and since the value of my house has decreased so much because of this housing fallout, then I don’t have that security and net worth, that I did have. I’m also fairly sure I’m not going to qualify for any of the money the Government has targeted to help people with their mortgages. I only read part of the stimulus bill, but it does not look like it meant for people like me.

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