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Definition of 'Credit Cycle'
A cycle involving the access to credit by borrowers. Credit cycles first go through periods in which funds are easy to borrow; these periods are characterized by lower interest rates, lowered lending requirements and an increase in the amount of available credit. These periods are followed by a contraction in the availability of funds. During the contraction period, interest rates climb and lending rules become more strict, meaning that less people can borrow. The contraction period continues until risks are reduced for the lending institutions, at which point the cycle starts again.
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Investopedia explains 'Credit Cycle'
Credit availability is determined by risk. The lower the risk to lenders, the more they are willing to lend. During high access to credit in the credit cycle, risk is reduced because investments - such as real estate and businesses - are usually increasing in value. Individuals are also more willing to take out loans because interest rates are lower.
After the peak, the assets and investments usually begin to decrease in value, or they do not return as much income, making it harder to pay back loans. Banks then tighten lending requirements and raise interest rates. This is due to the higher risk of borrower default. Ultimately, this cuts down the available credit pool which brings the credit cycle to the low access point.
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Search results for 'Credit Cycle'
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http://stocks.investopedia.com/stock-analysis/2009/Evidence-That-Consumer-Credit-Cycle-Has-Peaked-C-BAC-JPM0721.aspx
Recent earnings reports from major banks suggest that consumer losses during this
credit cycle may have peaked. ... Evidence That Consumer Credit Cycle Has Peaked. ...
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http://www.investopedia.com/articles/economics/08/credit-crisis.asp
... Force the Government to Take Emergency Measures As the economy becomes weaker and
the credit shock spreads from Wall Street to Main Street, a cycle of economic ...
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http://www.investopedia.com/slide-show/5-steps-of-a-bubble
... Economist Hyman Minsky identified five stages in a typical credit cycle
displacement, boom, euphoria, profit taking and panic. ...
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http://www.investopedia.com/articles/07/VC_cycle.asp
Cashing In On The Venture Capital Cycle. ... Advertisement - Article continues below.
The earlier in the life cycle, the less structured the investment process. ...
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http://www.investopedia.com/articles/stocks/10/5-steps-of-a-bubble.asp
... t Try This At Home.) Five Steps of a Bubble Minsky identified five stages in a typical
credit cycle displacement, boom, euphoria, profit taking and panic. ...
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http://www.investopedia.com/articles/fundamental-analysis/09/banking-stress-tests.asp
... the loans based on loan type, then project losses based on the aforementioned economic
inputs as they believe they relate to the current credit cycle. ...
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http://www.investopedia.com/articles/mutualfund/05/051005.asp
Life-Cycle Funds: Can It Get Any Simpler? March 30 2012 | Filed ... their clients.
Life-cycle funds offer a viable solution. Here we ...
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http://www.investopedia.com/university/ratios/operating-performance/ratio3.asp
... you should be asking include: Does this indicate that the credit reputation of ... that
"shorter is better" when analyzing a company's cash conversion cycle or its ...
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http://www.investopedia.com/articles/pf/08/agreements.asp
... Method of Computing Balance for Purchases Credit card companies use a variety of ...
Calculations may be done over one billing cycle or over two billing cycles. ...
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http://www.investopedia.com/articles/02/090302.asp
... cycles per year. The more management extends its credit cycle, the more
it risks defaulting on its payments. Based on this, one ...
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