Difference between revisions of "Credit Crunch"

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== WHAT IS SO BAD ABOUT THE KREDIT KRUNCH? ==
 
== WHAT IS SO BAD ABOUT THE KREDIT KRUNCH? ==
  
'''Negative equity''' is a term used to refer to when the value of an asset used to secure a loan is less than the outstanding balance on the loan. In short, when someone buys a house on a loan and the house price falls drastically after the purchase (as result of property price crash/subprime crisis), the buyer is left with a massive mortage he has to pay off, and a low house valuation by the bank. This often leads to bankruptcy and house repossession.
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'''Negative equity''' is a term used to refer to when the value of an asset used to secure a loan is less than the outstanding balance on the loan. In short, when someone buys a house on a loan and the house price falls drastically after the purchase (as result of property price crash/subprime crisis), the buyer is left with a massive mortage he has to pay off, and a low house valuation by the bank. He permanently loses the difference between the two prices, and this often leads to bankruptcy and house repossession.

Revision as of 11:41, 26 November 2008

WHAT IS SO BAD ABOUT THE KREDIT KRUNCH?

Negative equity is a term used to refer to when the value of an asset used to secure a loan is less than the outstanding balance on the loan. In short, when someone buys a house on a loan and the house price falls drastically after the purchase (as result of property price crash/subprime crisis), the buyer is left with a massive mortage he has to pay off, and a low house valuation by the bank. He permanently loses the difference between the two prices, and this often leads to bankruptcy and house repossession.