The borrower may be servant to the lender, but according to Dr. John Howard Brown, credit is “the lifeblood of a modern economy,” and should flow freely.
Consumers are finding more and more clots in the economy’s veins with the nation’s recent economic woes.
“And if credit is not available, the effects on the real economy could be disastrous,” the Georgia Southern University economics professor said.
Mike Reed, general manager at the local NeSmith Chevrolet, depends on credit, calling it just as important to a car dealership as the car buyer.
He said they can’t do business with empty shelves.
“When you buy several billion of dollars from manufacturers you don’t pay cash for those,” Reed explained. “You borrow the money.”
Mike Block, Liberty Chrysler general sales manager, has noticed recent changes in the economy have stretched the once 15-minute loan approval process to two hours.
“All of the banks have put tighter restriction on lending,” Block said. “We just have to work a little harder with the bank.”
Block said credit restrictions sometimes mean lower interest rates.
“Banks need to loan money to stay in business and with everything going on, they’re loaning at a lower rate, just not as much to an individual,” Block said.
He suggests that consumers pay more attention to their credit score now, more than ever.
He estimates the three-digit ranking weighs up to 75 percent of credit approval.
But it seems good credit is becoming harder to come by, with businesses dealing with late or missed payments from clients.
Henry Dunham is the property manager for Dennis Waters properties with approximately 700 rental mobile homes and apartments.
He sees roughly 30 percent of the tenants having difficulties keeping up with the payments.
“We’re having to be a little more lenient and work with tenants a little more, as far as paying rent monthly,” Dunham said. “I think we’re taking the economy into consideration.”
Because of climbing interest fees and service charges, John Ramps, a small business owner, shies away from borrowing and budgets to buy supplies he knows he can afford.
“It takes more from you,” he said of credit. “When you’re buying something on credit, you don’t make as much as a profit.”
He opened The Teaching Nook in Allenhurst two and half years ago.
Ramps accepts credit from his customers, waits until the end of the month before calculating it in to earnings.
“I don’t really like credit that much,” Ramps said. “I try to use everything else that I get...to pay off the bills and then that (credit transactions) comes as a surplus.”
If he pays cash for supplies, he finds companies will sometimes throw in incentives, like free shipping.
“Sometimes, with no freight charges, it’s saving you anywhere from $100-$200 per company,” Ramps said. “And that’s a big lump sum for someone like me.”
Even with lending restrictions sweeping the nation, NeSmith was able to sell more vehicles this September than September 2007.
“Our lenders know when we tell them some information about customers it’s the fact,” Reed said. “I think the banks and GMAC want to do business with people that are honest.”
Aside from business, Ramps admitted he would freely use credit in the beginning years of his marriage because “things pop up and you have to use something,” but has a different perspective now.
“It’s so easy to get a card and get overwhelmed with all these bills,” he said. “It’ll put you under and you can never get out.”
But Block thinks “it’ll all come out in the wash.”
“The economy always works itself out,” he said. “It’ll get worse if everyone’s scared.”