But when borrowers think about the availability of credit, they don’t divide themselves into creditworthy or not. And borrowers look for the supply of loans on terms that they want. Sticker shock over terms leads them to believe credit is not available. As the financial crisis unfolded and liquidity dried up, consumers and businesses alike found themselves facing two very different problems.
First, many found themselves unable to make payments on existing debt due to reduced income or reduced asset values. In some cases repayment plans had been predicated on earnings, employment, asset sale, or refinancing expectations that suddenly seemed unlikely. The second problem encountered by a number of consumers and businesses was a reduction in their access to credit.