Wall Street's Credit Crunch Hits Main Street

Aug. 23, 2007 — -- The credit crunch that rocked Wall Street is now hitting Main Street.

Americans hoping to purchase a new home have been bombarded with the bad news: The nation's ongoing mortgage crisis has made home loans tough to come by these days.

Now, there are signs that trend has moved onto other types of loans as well; many people are also finding it harder to get other types of consumer credit, from car loans to personal loans.

Increased home foreclosures and mortgage defaults have led some banks to reconsider their clients. In other words, easy-access loans have become a thing of the past. With foreclosures on the rise, creditors including Bank of America and CitiFinancial Auto are increasing requirements and fees before issuing credit.

Shopping for a new credit card has become tougher, too — approval rates have fallen 5 percent this year. People with lower to average credit are finding it much more difficult to borrow.

Melvin van Meter had been granted personal loans in the past, but when he recently applied for a new one, he found himself facing drastically higher interest rates. "The interests rates are just totally unbearable for someone like myself to handle," he said.

However, statistics are not yet reflecting the trend, with auto and personal loan rates unchanged from the beginning of the year.

Van Meter acknowledges that despite the difficulties he has faced in obtaining a loan, he realizes it is for the best. "If a person can't afford to pay cash for something and they can't qualify for a loan right now, it means they are not supposed to buy it."

Experts worry that if consumer spending, which makes up to two-thirds of the American economy, slows — either because Americans can't get credit or are concerned about the current environment — the entire economy could take a big hit.