How To Navigate Credit And Financial Risk In An Unstable Economy

I recently interviewed Sundeep Yerapotina, Chief Risk Officer (CRO
) for Rewards Branded Cards at Citi, which specializes in personal finance and credit risk management in a way that allows people to navigate the financial and financial risk in today’s unstable market.

What advice do you have for customers in the world? Any tips for managing existing debt or for those looking to take out new debt?

On the plus side, many consumers and households can take advantage of low mortgage rates for a few months to refinance their existing home or purchase a new home. With these rates for the next 30 years, it certainly puts these households in a good position with respect to the monthly repayment burden.

At this time, it is important for consumers to re-evaluate their household bills to take into account the higher costs due to inflation, but also to start managing the repayment burden of variable loans and future loans and plans to disrupt their income. in the near future.

Due to the possibility of a recession in the coming years, customers should try to build up enough savings to withstand the loss of their income up to three or four times.

From a credit management perspective, consumers first need to categorize their existing debt based on the nature of the debt and the interest rate. Debt with variable interest rates or high interest rates, such as credit cards, should be looked at first. Consumers should consider options to consolidate such debts into fixed-rate, low-cost loans to reduce their repayment burden. Given the appreciation of home values, it may be wise to take out a home loan at a good rate to consolidate these debts. Second, consumers should cut back on spending and postpone special projects, such as unnecessary home repairs, that require additional credit. Finally, there are loan decisions that we may not be able to postpone, for example, student loans for children’s education or emergency medical loans. Consumers should consider refinancing these loans when interest rates drop in the future.

From where you live, what are the medium to long term risks?

That’s a big question. The US economy faces broad and persistent risks. In my view, the following are some of the main risks:

  1. Geopolitical tensions: Diplomacy and de-escalation of political conflicts are essential to maintain focus on economic progress and other immediate challenges facing the country such as climate change.
  2. public debt: With the national debt exceeding $31 trillion and reaching more than 120% of GDP, the response of governments and central banks after the initial and subsequent recessions, and in the long term will criticize.
  3. Long-term business losses: The United States’ long-term trade deficit is hurting the economy in general and the country’s middle class in particular because of the long-term trend of job losses in many industries, the cuts in real wages and incomes, declining trade competition in US industry, and climate change. balance of power with major trading partners.
  4. Climate change: The disruptions that climate change is causing to human conditions and economic problems require urgent action. Not to mention the impact it has on our natural environment and the living things and animals.
  5. Pressure on the cost of living due to supply constraints on natural resources: I believe the answer lies in continuous innovation in addition to the evolving standard of living.
  6. Social and political divisions: The disparity of wealth and economic hardship among the working class will continue to create differences of opinion on various topics in our field. Deep divisions will limit consensus on key policy measures. Lack of long-term focus and decisive action, for example, in the problems mentioned above, will increase these risks.


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