Leverage on Credit Financing schemes

Credit Financing facilities

One of the most powerful tools to increase an individual's pricey possessions is to leverage on 'cheap' credit in this low inflationary environment. Central banks from G10 currencies had resort to slowing down inflation by introducing declines in interest rates. Businesses & Investors expressed bittersweet (mixed) feelings about the sudden recovery measures. The declining nature of interest rates has demonstrated that business activities are facing slower turnovers and revenue is on its way to the slide. On the other hand, bankers are touting some of the lowest credit lines in town with incentives like 0% interest for first 6 months or no admin fees for taking up new loans. Some banking institutions even send blank checks as a form of marketing strategy to unleash new credit opportunities. The world of credit resets from the previous bubbly crisis.

Manipulation of Financial Engineering

Under the new Basel III requirements, where banks need to adhere to stated legislations, these yield-hungry bankers won't take into considerations on the protection from statutory measures. Financial engineering, a common practice throughout the banking field, depicts the lack of transparency from professional institutions and consumers. There is a fine line between personal data protection as well as serving commercial interests. After all, the bankers need to help the firm generate capital to increase upkeep for sustainable purposes. Financially sound, the banks can proceed to offer more lucrative credit schemes to the general public with much ease. It is not easy to meet regulatory bodies embeddement of high reserve ratio requirement hence banks have to ensure a certain sum specifically to cater to the regulations.

Rotating credit Functions swiftly

In this modern industrialization, based on credit bureau agencies, statistics had shown that common folks borrowed up to 24times of monthly income and this could be a massive problem in the near future. To mention about rollovers, there is a possibility of up to 52times of monthly income on the basis of undertaking loans from 13 banks. Who can fathom the insanity of more than 13 lending enterprises? Many individuals are hopeful by using credit functions to rollover debts on a monthly basis. To make matter worse, the retail borrowers tend to lend money from one bank to cover the others until the credit limits reached an all time high, having said to face the music. The issue comes to light only when lendees are unable to pay up interests from banks and finally requiring financial assistance from credit counselling services. This is not a small matter as it detriments the economy once the credit bubble bursts. The IMF (International Monetary Fund) has to come up with new policies to curb potential problems as well as curtailing of current debt enforcements.

Humongous rollover of Credit debts

The power of credit is so powerful that even professionals can face problematic scenarios such as getting into scary debts of up to 52 times. The question lies on whether these bankers had done their own due diligence in assessing borrower's credit-worthiness. In an event that one is being led to the door, there is certainly a high probability of default from him/her. This is when the rollover starts ballooning to unattainable levels that gives incredulous stares to many. In line with credit agencies, the regulatory bodies are claming down on such instances to protect the economy from facing potential credit crunches. Instead of dealing with problems that are out of scope, banks may engage Credit Risk analysts to identify those who practice debt rollovers and barred them from borrowing more. This extra step may benefit many parties by mitigating repercussions.