Hey there brokeGIRLrich readers, check out this guest post from my pal Sushil from Inspiration Fund – he knows a lot more about the stress the real estate bubble caused then I do and if any of you are still trying to claw your way back out of the ruins, he’s got some empathy and some tips for you.
A Change in Financial Environment: Aim for Recovery
Greed caught major financial institutions when the Collateralized Debt Obligation (CDO) crisis finally struck. For years the real estate market had been buoyant with year after year rises in value. There were no outward signs that growth would flounder or that lenders would not retrieve their money in the event that borrowers defaulted on their mortgage. After all, even if they had to issue a foreclosure notice, it seemed like few properties would not be saleable above the level of the debt involved. Toxic debt was hidden and when the crisis hit there was an explosion in the number of borrowers who had no hope of meeting their financial responsibilities.
As more and more real estate was taken back there was an increase of real estate on the market and a decrease in the numbers of buyers. There was only one possible outcome; prices fell and those people who had just recently bought real estate with just a low deposit offered, found themselves in negative equity. They had followed the rules; real estate was a good investment everyone believed would grow throughout their lifetime. That still remains the case but unfortunately the line on the graph is not on a permanent upward line. The CDO Crisis was certainly a blip and one of the biggest in recent decades. Consumers who followed all the right lessons to create a secure financial future on the surface really found themselves at a loss in the helpless position they found themselves in.
The Road to Recovery
The home ownership is still valid but many people who were victims of the Crisis may take some persuading. Many lost their homes and even though the economy is improving and unemployment statistics have returned to pre-recession levels it remains difficult for some people to get back on track. They are unlikely to have much in the way of assets if they lost their real estate, so they have a major task getting to a position when they can buy again. Their credit score, a reflection of their financial history which includes details of their previous defaults, makes them virtually ineligible for help from the traditional financial institutions who are still nervous about taking on any debt that could possibly turn toxic.
There is some good news however. While the process of people being able to return to complete financial stability and even able to buy again takes time, there are online lenders who take a completely different approach to applicants in search of bad credit loans. Those people able to demonstrate a regular income and the ability to repay any borrowings in full over the term of the loan are likely to get approval if they are realistic. What makes their home realistic? That depends upon one key word: affordability.
Those looking to repair their financial lives have taken the first step by finding a job and regular income. What they must do now is look at their spending habits to see if there is a way to reduce them. Certainly credit card debt is expensive; balances incur a high level of interest at the end of each month and it is extremely difficult to repay a balance. The way to do that may be a consolidation loan which ideally will cover all existing debts; one payment at a lower monthly rate of interest than credit or store cards. That consolidation loan is quickly obtainable from an online lender.
The day when a person in financial difficulty can once again buy real estate is still some way away. However credit scores improve when loans repayments are made on time. Old history is of less importance as time goes by. It is time for determination and patience. Consumer confidence has certainly increased and hopefully the future is bright. The days of complacency should not return in the foreseeable future. Year after year increases in real estate values may be a feature in the future but perhaps more slowly than the first years of the millennia. If you know where to look, financial help is certainly available for those wishing to the return of a stress-free, or at least lower stress, life.