Investor Glossary-credit crunchInvestor Glossary-credit crunchInvestor Glossary-credit crunchInvestor Glossary-credit crunchInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Credit Crunch

The HTML to link to this page
 

A credit crunch happens when banks are reluctant to loan money to individuals and businesses. In a credit crunch situation, it becomes increasingly difficult for companies to obtain funding. When and if lenders do offer loans during a credit crunch, they do so at relatively higher interest rates, which can be prohibitively expensive. Several situations can lead to a credit crunch. When banks, in unison, are concerned about elevated counterparty risk (i.e. high rates of defaults, bankruptcy, etc.), a credit crunch can ensue. Also, if banks find themselves overexposed in an economic downturn (i.e. subprime mortgages crisis), many banks may have to reduce loan availability in order to not aggravate their collateral shortfall, resulting in a credit crunch. A credit crunch has significant consequences on the economy. A credit crunch can tighten the flow of capital causing businesses to lay off employees or shut down completely due to their inability to borrow capital. A credit crunch is also referred to as a credit squeeze.



Rate this Credit Crunch definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: FICO score, Key Rate Duration, implied volatility, 144a, required rate of return, class C shares, open position, Zero Cost Collar, ex-dividend date, retained earnings, LIBOR, stock split, EBITDA, ex-dividend, limit order, balance sheet, FTSE, deferred tax, liquidity ratio, 1031 exchange, per diem, deferred revenue, reverse mortgage, cancelled check, stock market close, margin rate, current ratio, diluted share, dividends payable, real GDP, in escrow, risk management, APR, irrevocable trust, command economy, quality assurance, wholly-owned subsidiary, 1035 exchange, option premium, VIX, covered put, labor relations, average price per share, inflation, phantom income, minority interest, 401a, debt service coverage, annual return


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Home | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use