What a Financial Mess!

There was a time when banks exercised financial prudence in their consumer lending. They seemed to patronise would-be borrowers, who, going to the bank manager 'cap in hand', were often made to feel like naughty school children for having the audacity to ask for a loan.

The reality has always been that banks are commercial enterprises, out to make a profit just like any other business. It's just that they've always held the upper hand.

As the banking industry expanded, competition became fierce, and with it came a relaxing of common sense, with regard to lending policies. Financial prudence seemed to go out the window. Now we have an awful credit mess, and have become a nation of borrowers not savers.

In my opinion, responsibility for much of the credit card and mortgage debt problems being experienced today, lies with the credit card issuing companies and the banks, for their lack of financial prudence. Not just that they relentlessly pursued their profits above all else, but that they failed many of their customers by not refusing credit applications, that in the past would have been considered borderline or completely unacceptable. They failed to adhere to traditional lending fundamentals.

But sadly, this failure to be sensible financially, also applies to many borrowers who have over-extended themselves. Some unwittingly, who just wanted to buy a family home perhaps, even though it stretched them financially, but also those who, through runaway over-spending without much thought about repayment, have accumulated tens of thousands in credit card debt.

There's nothing wrong with borrowing money, it has become a way of life, and many who are in debt will have got there through no fault of their own, but borrowings should only be made where there is a reasonable expectation that they will be repaid. Some banks and borrowers seem to have lost sight of this principle.

The way forward for many who are in debt today, is to take personal responsibility for the situation and to get back to basics.

• Make a budget and stick to it - buy the things you really need instead of those you would like to have.
  
  
• Contact your creditors before they chase you, if you know you are going to have  difficulties in paying current commitments.
  
  
• Live within your means. Don't pay others to do what you could do yourself e.g. Prepare your own meals for home and work. Don't buy takeaways and fast food.
  
  
• Pay less for your goods and services. Spend time shopping around. Reduce the cost of your borrowings wherever possible.
  
  
• Pay down your debts as fast as you can.

Being sensible about how money is spent, and not borrowing unnecessarily, are essential steps to getting yourself out of debt. Are the banks going to help you when they are in such a mess themselves? Consider the number of repossessions/foreclosures this year, and the number of personal bankruptcies.

The important thing is to take some action now, to take responsibility for sorting out your debt problems yourself, before it becomes too late.