Lending in days gone by involved very much more benign conditions than prevailed today. When terms such as days gone by are used they most frequently refer to the days when we were children, or the days when our grandparents were young, but in this instance days gone by means less than two years ago. The reason for this is of course due to the credit crunch, the supposedly unanticipated collapse of the sub-prime lending market, and the consequential recoil of the bank and other financial institutions from risk both specifically and generally.
A good example can be seen if you want to borrow something as low as a 5000 loan. The number of companies who are interested in taking on business such as this has reduced significantly and the hoops that you now have to jump through before you are able to put you hands on the cash are significantly tougher too. There is in effect no such thing these days as an easy 5000 loan.
But how long are these lending conditions likely to stay with us? Well, reports suggest that the cost of the write-off of loans in the sub-prime market are so signficant, and many of them have not really been properly disclosed, that it may well be many years before the banks are back on an even keel and able to view the consumer lending market with anything like a favorable eye. Indeed this time frame may be exacerbated by other loan losses, most especially commercial real estate loan losses which are expected to continue to hurt for a long time to come.
In past crises it has needed a new generation to elapse before the appetite for lending risk has once again resurfaced and it may well be this long before we too can look to borrow something as simple as a 5000 loan without cause for concern.
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