Credit Crunch

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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.