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Can America Really Afford Such a Loan? Americans just can’t stop spending. There are so many appealing things to buy right now, that Americans are getting themselves further and further in debt.
Mortgage companies have taken notice of this and found a way to capitalize on America’s debt problems with the 125% Home Equity Loan. A 125% Home Equity Loan means a mortgage company will actually loan you 125% of the value of your home. What is wrong with this picture, a loan for more than you have in assets? Many people see this as a way to get them out of debt without the need for bankruptcy. Well think again. Yes your 125% Home Equity Loan might offer a lower interest rate than you are paying on your credit cards, but this does not get rid of the initial problem of over spending. Imagine, you get a 125% Home Equity Loan pay off all your credit cards, and you feel like the weight of the world has just been lifted of your shoulders. Then you say to yourself, “Hey I got no debt, maybe it’s time to get a new surround sound home theater system”. Out you go to your local electronics store, plop down $7,000 on a new system with a 42-inch plasma TV, DVD player, surround sound amplifier, the whole bit. Where does that leave you? You have a house that is not worth a thing, plus $7,000 in credit card debt. See how this vicious circle works? I have ran this through my mind trying to think of any possible situation where a 125% Home Equity Loan will work for someone, and the only thing I can think of is to use it for Student Loan Consolidation. You have just finished your degree and started a very promising new job. For a person without the spending problem mentioned earlier could make this work. Also keep in mind that you will need to live in that house for a long time in order to recoup the initial debt. Another situation might be someone that has a family and just got laid off from their job. The 125% Home Equity Loan might buy them some time in order to ensure that they can provide for their family while finding a new job. Once a new How-to Information Resource Guide |
