What is the freezing of credit?
credit freezing or credit crisis is a situation where the credit market stops, which basically places the whole economy in free fall. While most average consumers are familiar with the basics of consumer loans in the form of credit cards, student loans, credit lines of houses, etc., it may not be aware of the importance of the loan in the business world. If the credit market does not work, the ripple will occur, with considerable emphasis on the economy will have considerable emphasis. First, banks can reluctant to offer credit to consumers and then to businesses. People may be obliged to meet very strict requirements before they will be offered loans, and interest rates and loan fees can be extremely high. It can be frustrating for individuals, but it is devastating for businesses. Most businesses rely on the open line of the loan with their bank to meet wages, buy supplies and cover further overhead costs. When oninemohou get this credit, they are forced to drastically reduce the size to make with thisThey equalized the question. Government agencies also need a loan and inability can lead it to unpaid government workers from teachers to employees of water adjustment, as well as freezing government aid in the form of grants, loans, etc.
When the businesses slow down operations to deal with credit freezing, the running effect occurs. People can be left without employment as a result of dismissal and the flow of consumer goods also slows down. For example, many transport companies use the Accreditation in their business, and if they cannot obtain a loan, their goods will rot in the harbor, which will lead to a lack of an end destination. Increased demand for reduced goods can lead to price increases, causing the freezing loan to be harmful.
Banks can also stop lending money to each other on the loan. Free cash and securities are a critical part of a functioning banking system. In a loanBanks are afraid of lending to an unsuccessful bank and will not be able to restore funds. As a result, they lock loans, often lead other banks to fail because they can't get credit.
As the financial market slows down, the freezing of the loan can become self -service. Banks have refused to lend money to each other for fear of failure, causing banks' failure, while consumers start to panic, pull their stored and invested funds and thus push even more to the market. In order to terminate the freezing of the loan, drastic steps must often be taken, otherwise economic depression may be.