Since the recession in 2007, many businesses closed and individuals lost their jobs. The immediate solution to a lot of financial companies is to lower their credit standards to accommodate mortgage securities, household debts, and others. It is evident that the level of borrowing in the market has increased over the past few years. All these are attributed to the flexibility of banks to give out both personal and business loans to as many people as possible.
A few years ago, it was hectic to get either a personal loan or a business loan. Banks decided to become more flexible in giving with the aim of kick-starting the economic recovery. However, a new challenge has arisen. The fact that banks are giving too much leaves the country in doubt. Because now, the question is if this can be sustained without making more injuries into the economy.
By 2012, loans were up by 4.4%. Banks have now more than ever before been loaded by liquidity. However, the biggest issue still remains. The issue of one starving economy. Even foreigner loan Singapore applications increased because of this. Singapore like United Sates, Canada and Japan are just one of the few countries that fell into this direction. Different kind of loans and financial assistance are offered left and right. With banks giving so many people both personal and business loans, the biggest question is on the profitability of the loans Keep in mind, that loans must be a profitable failure to which the banks will affect the nation and in turn, come to an economic turmoil again.
Arguably, it has affected the rate of unemployment in all over the world. The rate was 7.9% in January as compared to the previous year which was 8.3%. The majority of the personal loans have been used by many individuals to boost the economy. It is used by either starting a new business or building upon an existing business. On the other hand, major companies have used business loans to expand businesses from several states to even further more states and from their country to other nations. This has helped increase the level of productivity of the loan in the market.
This low interest rate on personal loans and business loans has led to the increase in loan competition which eventually made the loan structure weaker than it has ever been. The same has been seen to happen with banks all over the world. All the countries were affected by the economic turmoil. However, after this, banks also sought to give out loans at reduced interest rates. The banks did this with the aim of enhancing cash flow into the economy. The amount one can borrow has also significantly increased. The government also reduced the ease by which one may borrow by providing online platforms. One can easily apply for a loan and get it instantly in their bank accounts.
We can say that the financial turmoil in nations had a bad effect on the nation’s economy. But, this can also be seen as a building block of economies since it has now allowed many banks to reduce their interest rates and increase the amount one may borrow. In spite of this, the biggest challenge remains of how banks can maintain this borrowing rate without injuring their economy again.