credit crunch

A credit crunch occurs when banks and financial institutions become hesitant to lend money, even to reputable borrowers. This often happens during economic downturns or financial crises, leading to a shortage of credit available for consumers and businesses. As a result, borrowing costs rise, investments slow, and economic growth can decline. It creates a tightening of credit markets that can deepen economic difficulties, affecting everything from home mortgages to business expansions. Essentially, a credit crunch makes borrowing more difficult and expensive, impacting overall economic activity.