What Treasury’s Change of Plans Means for You

Consumers hoping for cheap loans may be out of luck.

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Treasury Secretary Henry Paulson announced yesterday that the bailout will no longer involve buying up banks’ distressed assets. Now, the money will still go to banks, but the goal will be to more directly free up money for consumers.

In theory, that sounds like great news for anyone interested in a student loan, auto loan, or mortgage. But what does it really mean?

The details are still shrouded in mystery, at least partly because Treasury officials have been reluctant to speak at length to the press. They also say they are still working out the details themselves. But this much is clear: Congress wants the bailout money to help consumers who are currently unable to take out loans at reasonable rates, and Treasury is trying to figure out a way to do that.

Yesterday, Paulson also suggested that change won’t come quickly. He said he was wary of creating new programs before President-elect Barack Obama’s inauguration.

So, what does it mean for consumers in the market for, say, a new car? Sit tight, try to boost your credit score, and, unless you’re a stellar client with down payment money and an impressive credit history, you may want to consider delaying your purchase until the credit markets free up. Otherwise, you’ll likely be stuck paying unusually high interest rates or, even worse, unable to get a loan at all.