Master the credit crunch: Don’t get punished by the financial world’s blunder…

Here’s what happened: US banks lent too much money to hicks buying new houses, those hicks couldn’t pay their mortgage repayments, meaning those banks had to stop lending to avoid making massive losses themselves. Meanwhile UK banks, including Northern Rock, were doing the same thing. When the big banks could no longer borrow from each other, all the banks shut up shop. Here’s how we’ll now suffer…

How it affected…

MORTGAGES
“We’ll see an increase in repossessions,” says property expert Andrew Callan. As fixed-rate mortgage terms end people won’t be able to afford the new rates.

Shares
“The majority of share prices plunged,” says Ryan Kneale, Market Analyst at Betsfortraders.com. “No borrowing means no money spent. It’s a vicious cycle.”

MOBILE PHONE BILLS
With figures claiming the average working family’s disposable income has dropped as a result of the crash, those text alerts might now seem less than essential.

YOUR WAGES
The government has abolished the 10% tax threshold, which means workers start paying tax at a higher rate – terrible news for people who earn crumbs already.

GAS AND ELECTRICITY BILLS
“With a typical energy bill now topping £1000 per year,” says Mark Todd from www.energyhelpline.com, “many consumers are struggling to find cash to pay their bills.”

YOUR HOLIDAYS ABROAD
James Hughes from CMC Markets says it’s bad news: “People are selling the weaker pound and buying Euros. So, it’s more expensive to go to the Med this year”.

INSURANCE
Pensions and insurance are being squeezed by the crunch as people cut contributions to save cash, although financial advisors are strongly against it.

PERSONAL LOANS
The criteria for lending is getting harsher. You’ll need a strong credit rating, a good income and monthly incomings that exceed your outgoings to secure a personal loan.

CREDIT CARDS
Lenders have slashed credit limits. “Basically, they don’t want customers to take out the entire amount and then leave them in the lurch,” says Paul Kean of the RBS.

MONTHLY RENT
The buy-to-let housing market has taken a huge hit, but people are now less able to snag a mortgage, so rents rise.

How to beat it…

MORTGAGES
”It’s not in the interests of banks to repossess”, says Callan. “The rule is to speak to the lender, not just throw the keys back at them by defaulting on your payments.”

SHARES
Buy now-low-priced shares in companies you trust will bounce to back. “Savvy investors have already made big money by doing this.”

MOBILE PHONE BILLS
Dig out old phones and recycle them for cash. T-Mobile offers up to £80 for some old blowers, so head over to www.t-mobile.co.uk/recycling.

YOUR WAGES
Use Setyourrate.com to supplement your income by offering your skills to others. DJing? DIY? Personal trainer? Turn those skills into a second income.

GAS AND ELECTRICITY BILLS
Firstly, pay by Direct Debit. Savings of up to £200 can be made if you switch everything to DD. Secondly, use comparison sites to work out if you’re being ripped off.

YOUR HOLIDAYS ABROAD
Look for a currency that’s weak in value against the pound. According to Hughes, “The obvious one is the US dollar.” That’s where you should go this summer.

INSURANCE
Use one of the price comparison sites such as comparethemarket.com, which weighs up a number of insurance providers in one go to get you a better deal.

PERSONAL LOANS
David Aitken from EFS advises getting a credit report, and taking steps to improve your status. “Make sure you pay off your credit card minimum each month.”

CREDIT CARDS
“Borrowing on an interest-free card is a sensible option,” says David Aitken. “As long as you follow the golden rule (see above).”

MONTHLY RENT
If you’re renting, try and negotiate a long-term rental so that the landlord can’t razz the rent up when it suits.