What is a Credit Crunch / Credit Crisis?
A Credit Crunch is a sudden reduction in the availability of cheap loans & credit which may be due to increase perception of risk by lenders, a change in monetary conditions, or even the introduction of stricter credit controls.

• Where did this Credit crisis come from?
  A reduction in interest rates will stimulate more borrowing by consumers and businesses. As house prices reach a critical level where they become unaffordable, the fear of consumer inflation increases & interest rates will also be increased. This makes it more difficult for people to obtain cheap credit.
  
  
• What does this mean as a borrower?
  Cheap loans & credit have been freely available in the past; this will no longer be the case. Creditors are tightening their lending criteria in an effort to reduce risk & subsequent defaults on borrowing. As a result, people with poorer credit histories or low incomes will no longer have access to the same cheap credit that they so much rely on. The immediate effects will be felt by those people who rely on 0% interest rate balance transfers to manage their affairs & keep their monthly outgoing to a minimum. These people will find credit becoming more expensive & their monthly outgoings increasing.
  The other main casualty from this credit crisis will be those looking for mortgages or to re-mortgage. People will find with the unavailability of cheap credit, that they are forced into expensive contracts that they can not afford. The main outcome of this will be an increase in the repossession of people's homes, & the potential for bankruptcy.
  
  
• What can I do about it?
  It is very important that you consider how you will be affected over the next few years. If you are struggling now, how will you manage when the crisis peaks? If you are relying on credit to survive, how are you going to live when it is no longer available? If you think you might be affected by the looming crisis, you need to consider what action to take. There are many options available to you - the most important thing is to speak to a professional who can advise you on the best course of action.