You’ve likely read the news about Silicon Valley Bank’s financial collapse. The fallout in the banking system is certainly being felt, with tighter credit conditions on the horizon for businesses and households alike.
This isn’t great news, as it could ultimately lead to a ‘credit crunch.’
You’ve probably heard the term ‘credit crisis’ and might wonder if it’s the same thing.
A crunch is a decline in financial institutions lending money to their clients (that’s you) – it’s brought on by a shortage of funds and is a close companion to recessions. It becomes a crisis when banks stop lending to each other.
We’re not quite in credit crisis territory, but a credit crunch can still affect the average American and there are a few things you need to know.
First, banks tend to want to keep their money close when funds are an issue, which means slowing down loans to lower-qualified borrowers. They just don’t want to take the risk that the money they loan will disappear. (If your credit score isn’t great, this is as good a reason as any to start improving it!)
Second, if you own a business and have loans nearing end-of-term, now might be a good time to refinance.
Third, if you don’t already have an emergency fund, start one. Have 3-6 months of expenses tucked away for when things don’t go as planned.
The waters might be a bit murky in the finance world right now, but it’s not the first time we’ve seen a credit crunch come up, and surely it won’t be the last. That’s just how economics works.
The best thing you can do is be prepared and educate yourself. Working with a financial planner is a great way to start. Give me a call at 330 836 7800 Ext. 1 or set up a time in my online calendar below to get a 15-minute review of your financial goals.
