Mark it down... car loans will dry up, and then credit card companies will raise rates & fees...

[Blackhatjack]

IMHO we are in the pre-panic 'get as much as we can right now out of the consumer because shortly he is going to be under water' phase.

Credit card companies who can shift people to default rates at 30% or higher will do so. They will also ratchet up the fees for late payments and over limit. And these changes will occur without there being any missed payments by the consumer.

And when it comes to buying cars, anyone without excellent credit and a substantial downpayment will be denied financing.

We are headed into a serious storm here when you consider most folks have been using their home equity as a loan source. Now as house prices drop, that source is gone.

IT is never as bad as it could be, but it might be worse than anyone thinks.

[BeHereNow]

1. I vote for "worse than anyone thinks"

I'm glad we don't have any debt.
It's gonna get real ugly, real fast.
BHN

[Viva_La_Revolution]

4. Seconded.

very bad
very fast
:(

[Lone_Star_Dem]

2. I was wondering about the impact of this on other forms of credit down the road

I honestly hadn't considered it's impact on auto loans yet. That would devastate the already wounded auto industry even further. Another aspect of such would be an increase in those vile tote-a-note lots that prey on people unable to purchase via other means.

[NYC]

7. Please explain to me what a "tote a note" is.

Thanks in advance.

[awoke_in_2003]

8. Tote the note

joints finance cars themselve to people with bad credit. Say you put a thousand down, they will finance at very high interest rates. If you pay the car off, they make big money. If you don't, the repossess it real fast then collect another $1000 off the next sucker buying it.

on edit- changing to point to the fact that the tote-the-notes finance the cars themselves.

[NYC]

13. I guess that sounds like something to be

expected from a used car lot. Those places have never had a good reputation.

Thanks for the explanation.

[Lone_Star_Dem]

9. It's a used car lot that does in house financing for those without credit

They usually sell very low quality vehicles which they purchase at auctions, and then sell "as is" meaning with no warranty. The down payment they ask for is equal to what they have invested in the vehicle and their interest is insane.

[NYC]

14. Between your explanation and the other one,

I see that they can make back the cost of the car many times over.

Since the down payment covers their cost, when they repossess it, the next sale is all profit.

Thanks.

[Postman]

3. Been seeing car and truck commercials stating....

"offer applies only to very qualified buyers"....

found it strange to listen to...

[SeattleGirl]

5. I just paid my car off this week. It's still in good shape, and I plan

to keep it that way as long as I can. I can't afford 30% or more interest on a car loan.

[Viva_La_Revolution]

6. already happening.

just google news "rates raised"
:(

[WorseBeforeBetter]

10. It'll be interesting to watch the reaction of those...

who have known only 0% financing and historically low interest rates. And that of one 20-something in particular who actually said to me a couple of years ago (during the Northern Virginia boom) that "housing prices never really drop."

Not to sound like a dinosaur, but isn't this how it was done at one time?: "...anyone without excellent credit and a substantial down payment will be denied financing." My parents put the fear of God in me when they handed over a Montgomery Ward (Montgomery Ward!) credit card with a $900 limit as I headed off to college. That's certainly the opposite extreme of what we've witnessed in recent years.

Prime rate historical data since 1947:

http://mortgage-x.com/general/indexes/prime.asp

Yep, this is gonna be interesting to watch.

I have genuine sympathy for those who have experienced legitimate hardship (divorce, job loss, medical, etc.), but for those using their homes as ATMs because they *need* $100K kitchens and the latest toys -- you brought this on yourselves. Unfortunately, it'll affect all of us.

[FARAFIELD]

11. closer to the truth

is that we will have a consumer driven recession which we havent had in 30 years or so, people will finally stop spending money they dont have. Not that lenders and idiots took out big loans they couldnt repay, but god was that BUSHBOT "ownership society" thing the dumbest thing people ever fell for? and by pushing all that money in it just showed that the fed will prop up wall street before it lowers rates which will help JQ Public

[JDPriestly]

12. The economy is top heavy. The wealthy have more money

than is healthy. When that happens, investments soar. Stocks appear to be increasing in value, but less wealthy consumers stop buying gradually because they don't have enough money because wages are too low. That situation alone does not trigger economic disaster because the imbalance can correct itself if wages are allowed to rise and more money is put into the economy generally.

What triggers the disaster is a drought, unusual flooding, an increase in the prices of basic necessities . . . . That sets off panic and causes consumers to try to hold back, maybe even sell out to make money sort of cashing in assets to pay bills. Discretionary buying by consumers decreases. Because companies sell less to consumers, they make less profit, and, since consumers are not buying because they don't have the money, the little small investors also don't invest even as much money as they usually do. New money does not go into the investment markets, and that is when people notice the stock market is not rising at such a steady rate and the top investors begin to ask questions.

Right now, the Fed is trying to print more money. That will be inflationary, but it will prevent panic until and unless some other factor hits us. For example, if a Katrina hits at a wrong point, the economy could fall to pieces.

As it is now, some elements of the economy are strained, but the economy can probably recover. It takes a combination of factors to cause serious problems. Top heavy investment, low wages, too little consumer demand, plus, and this is important, some crisis in supply of some needed commodity and then panic starts.

Right now, I've heard that consumers still have confidence and there is demand. Also, in spite of the drought in the Southwest and higher prices for basic commodities like food, we don't seem to have any kind of lack of supply. Thus far, not all the factors for economic disaster are present. We could still have a recession and some unforeseeable event could tip the whole economic scale way out. I'm not an economist by profession. I just go by common sense, and I've been pretty accurate in previous takes on the economy. This is how I see the current situation and why.

[fed-up]

17. I believe that weather changes/global warming will bring about the disaster that is the last straw

[JDPriestly]

18. I do too.

But not quite yet.

[AlCzervik]

15. Car sales are way down in Ca. and have been declining over the past year, that was

one of the big indicators things were starting to boomerang. California is a car culture and when people stop buying them it should be a big warning to everyone.

[neverforget]

16. 2 weeks ago I got a notice in the mail that my student loan interest was increased

by .25%. I have a mortgage and student loans as debt at the moment while I'm in school. Last month my employer notified us that work is slowing down but they are looking for more (I work in GIS) but the competition has been tough. So now I'm worried about losing my job. If I lose my job and don't find something quickly, I am going to have to sell our house because it's impossible with just my wife's income. It gets worse. There are already 3 houses for sale in our neighborhood and they have been on the market for 3-6 months.

Here's what I expect to happen: i lose my job before the end of the year, put the house up for sale but there are no buyers because of the mortgage meltdown so my house will be foreclosed on next year and I end up moving in with my in-laws or my brother. We have enough money saved to get us through about 3-5 months but then it's over.

I am very pessimistic because just when I think things can't worse in the world, they do. It's like karma for America putting up with raisin brain as President.