We know that when the economy is in a downturn, or when the economy is in a certain predicament, there are many factors that will make it difficult to get a lot of loans. When the economy continues to decline, it is even more difficult to find housing loans for people with poor credit. Therefore, when the economy continues to slow down, it will have the greatest impact on those with poor credit. Although the country will take some measures to regulate at this time, For example, the interest rate is lowered to stimulate the growth of the real estate market, but these measures are not enough to cope with this situation, especially for those high-risk borrowers, because no one is willing to take an unknown risk to borrow the already limited funds.
Decrease in available loans
In the process of economic recession, because banks and lenders need cash to lend to consumers, the first problem faced by high-risk people is that the number of loans they can borrow is greatly reduced. In addition, in the process of economic recession, because borrowers default on their debts, it means that banks and some lenders will have less money, because no one will pay them back. In addition, Since some formal financial institutions often deposit a large amount of their funds in the stock market, their money will flow with the flow of the market economy. When the market loses money, they will also lose money as every family faces.
As we mentioned earlier, because lenders have very little capital now, they cannot provide you with the same amount of loans as before under such circumstances, which leads some people to only consider customers with higher credit scores and more credibility when providing loans, to ensure that their current capital can be used reasonably, but when you are a high-risk person, When you are a borrower, if you want them to lend you money, you must raise the interest rate or make a mortgage on the basis of what they give you, otherwise you will lose the opportunity.
More loans may be paid
When the market economy is improving, the lender may issue some high-risk loans. Because in a good market economy, although there are high-risk loans, high-risk loans also face high returns, because these borrowers have the ability to repay such risky loans, such as a salary increase or a higher year-end bonus, but they cannot get higher wages in the process of economic recession, Or they can't get economic resources from other places, which makes these people unable to repay the loan, and the lender gains income. They will reconsider the granting of such risk loans to these people.
For example, if your credit score is very low, the lender will not lend to your bank because you are a high-risk borrower and are worried that you will default on the loan. In order to obtain the loan at this time, you may need, such as mortgage funds or accept some of their more unreasonable conditions, such as raising interest rates for you, regardless of their means? What you need to know is that you need to repay more loans than before.
For high-risk lenders, the biggest problem is that when you owe a huge loan, you need to mortgage the house to repay the loan. When you bought the house, the debt owed was assessed when the economic market was improving, but now you are assessing the house when the economy is backward, which means that the money you owe will be far more than the current market value.
When you are going to sell your house and start a new mortgage project, you have no right to cash out from the mortgage, which means your risk will be higher.