How the Credit Market Squeeze Affects Your Personal Finances

With all the craziness on Wall Street and the knowledge that big banks have stopped lending to each other in what has become a rather severe credit freeze, many people are saying, "so what?" And why not? The big banks got themselves into this mess, let them get out. After all, what does the credit market squeeze have to do with us "regular folks"? Well, it turns, out, the credit market freeze is already affecting many people on a personal finances level.

Getting loans

The biggest way that the credit market squeeze affects people's finances is through the lending process. When banks are not lending to each other -- when even the big institutions can't get loans -- it means that the rest of us are really going to have problems getting loans. Some of the loans affected by this credit market squeeze include:

* Mortgage loans.

* Credit cards.

* Car loans.

* Student loans.

Not only is it difficult for those with less than perfect credit to get loans right now, but many people with good credit are having difficulty. This is because the capital to lend just is not there.

Another problem facing many people is a restricting of the credit they already have. If you have a home equity line of credit, you may be finding that it has been frozen. Many people are finding themselves cut off from accessing the equity in their homes. On top of that, in some cases credit card companies are reducing credit limits. Make sure you double check your limit before you put your next purchase on your card!

Indirect affect: Jobs

The biggest factor in your personal finances is probably your job. Right now, with the credit market freeze, thousands of jobs are in jeopardy. The Wall Street crash and bank failures are already leading to large amounts of job loss. However, if the credit market is not providing other businesses -- especially small businesses which employ millions of people -- with the loans they need to continue day-to-day operations (including payroll), we may see other businesses beyond the banking sector begin to fail.

Even without business failures, cutbacks due to cash flow problems can potentially affect thousands of people.

It is true that even something that seems insignificant to most of us in our day to day financial lives is actually quite influential. Before you wonder why there is so much concern over loosening the tight credit markets, stop and remember that a credit squeeze affects your personal finances, too.