Lenders are concerned that rising unemployment and a potential recession will send loan defaults soaring. The moves suggest at best a pause and at worst an end to six-plus years of a bull run in credit, where financial firms have been eager to lend and underwriting standards for credit cards, auto loans and personal loans have been relatively loose.
Lenders are scrutinizing applications for credit cards and personal loans in particular because consumers often turn to them when they are in a bind. They are usually unsecured, which means lenders have little recourse if a borrower defaults, and they can be the first loans people stop paying when money is tight.
It sounds like credit is going to start drying up⌠if you want to access your HELOC or credit cards I would say do it now rather than waiting until they are cancelled.
In the past, when credit dries up it dries up for everyone.
Just because you have good income now doesnât mean youâre income will continue.
Banks also have to manage leverage and exposure. Itâs not about whether you as an individual borrower will default or not. Itâs about whether the bank can prudently (and legally) keep that risk on their balance sheet. If you have a 15k credit line, but only ever use 2k of it, theyâll likely cut your credit line so they can give a 5k line to someone else and earn fees off two customers instead of one. Itâs true even if they were absolutely positive that you could pay off your loans without default. In a more certain economic environment they could keep you at 15k and still offer 5k to someone new, because the bank itself has a stronger balance sheet.
Merely as a reminder, the topic of this thread is physical cash, and why might there be a need for it in this pandemic. Physical cash is coins and currency, anything from dollar bills on up to Franklins.
Posting because I have come up with a new use for currency, one related to the pandemic:
When you hire someone, or enlist help from a friend, to purchase groceries for you, you have two choices on the payment side. You can give that person your CC, or you can give them cash money. Depending on the relationship you might be good with the former option. But otherwise youâre gonna need cash!
Personally, because of the pandemic, I have doubled my local bank balance. This because that bankâs ATM is my source of cash. And the way things are unfolding, you never know.
There are at least three more choices â checks, zelle, and venmo.
China was disinfecting their cash at some point (not sure if this is still happening there or anywhere else). Many take-out restaurants around here put up âno cash - card onlyâ signs.
Wait - you handle delivered packages with gloves and leave them in your garage for days to âdecontaminateâ, but youâll withdraw and use cash (thatâs been god knows where) from the local ATM?
Venmo? Old guys living in the middle of nowhere that get deliveries of canned goods from Target and talk about Trumpâs press conference timing in terms of Newfoundlandâs time zone donât use Venmo.
Cash is already rarely used in China, at least in the cities, not sure about more rural areas. Even homeless people have qr codes (or something similar to that) that you scan to give them money through alipay or wepay (possible Iâm getting those names wrong).
Cool your jets, glitch99. I have not visited my bank or used an ATM there, or elsewhere. Period. And youâre still in denial, I suspect, regarding the 30 day rule.
Though this might be news to you, there is such a thing as being prepared. Should circumstances in future force recourse to cash, it will be there for me. The future belongs to those who prepare for it. And if I never need cash, as I hope will be the case, so what. There is no loss.
JPMorgan Chase & Co., the countryâs largest lender by assets, is raising borrowing standards for most new home loans as the bank moves to mitigate lending risk stemming from the novel coronavirus disruption.
From Tuesday, customers applying for a new mortgage will need a credit score of at least 700, and will be required to make a down payment equal to 20% of the homeâs value.
The change highlights how banks are quickly shifting gears to respond to the darkening U.S. economic outlook and stress in the housing market, after measures to contain the virus put 16 million people out of work and plunged the country into recession.
I go along with a strong credit card. Foreign countries seem to be more confident with cash. This pandemic is about as close to a catastrophe as we probably will ever know.
Interesting article. According to Warren Buffett, " Cash & courage in a crisis is priceless".
