Interest Only and Credit Card Debt
Well, here is an example of the system that isn't functioning as
intended: a mortgage loan that encourages paying off one debt,
in order to overspend ourselves with another debt. The interest
only mortgage and the credit card debt. As a borrowing nation, I
believe we've reached new levels.
It would seem that in this century we've managed to take every
form of credit possible, extend it to the limit, and then look
at them as if to say, "You mean you can't pay?" What do these
loan and credit companies think they're going to be facing, when
the amount of credit and mortgage they're willing to extend,
reaches beyond the acceptable debt to income ratio? Why do they
think these limits were established in the first place? More
consumers than ever before owe massive credit card debt. It's
the way to go, many college campus' are overrun with
representatives from the major credit card companies, eager to
extend credit to the young hands of the college student. Are
they as ready to work with them when they can't pay? No. What
about the rest of the crazed, spending public? How do they
handle their credit cards? Well, thanks to the interest only
mortgage, we can now pay off credit card debt we can't afford,
with a mortgage we can't afford. Now, that's progressive
thinking.
The interest only mortgage is now a tool for replacing
non-deductible over extended debt, with tax deductible over
extended debt, and consumers continue to be the ones to pay.
This is not a wise option, if you're already spending more than
your budget will allow, how about cutting back? Did that ever
occur to the mortgage company? No, because they don't make any
money if you learn to spend less.
As a fellow consumer, each of us should take the time to
question our spending habits. Is it wise or necessary? If the
answer to either question is no, then don't spend. You don't
want to have to make the decision between over the limit
spending, and a nice, warm bed, do you?
Okay, now here's an interesting spin on an already risky
product, let's give the bad credit crowd a chance to make an
even worse decision, and finance a home they can't really afford
and obviously will have trouble making on time or dependable
payments so they can payoff credit card debt, only to charge it
up again!
Sometimes, the products and situations that you see in the
everyday world of researching these loans, is truly amazing and
this is one of those situations. There are actually mortgage
companies that advertise these interest only mortgage options
for the consumer with the bad credit record to pay off any
outstanding credit card debt!
Now, what I'd like to know is why the mortgage company, in all
good faith, would want to take a risk such as this. It's risky
financing for consumers with bad credit, when you're financing
with good solid collateral, well within their means to pay. You
take the consumer and the mortgage loan outside those realms of
operation, and you're just simply asking for a problem.
Maybe we should have an agency that's known as the "mortgage
police" and when there's a clear and evident violation of just
good sound common sense, a whistle blows, the computer locks up,
and in walks the mortgage police. I truly believe the consumer,
if not the mortgage company would be a lot better off;
especially when the consumer has time to really absorb the basic
facts about interest only mortgage, and the mess they can make
of their finances; in the case of the bad credit consumer, the
further mess they can make of their finances.
With all the government control that regulates the mortgage loan
industry, and all the statistics that are published about the
consumer with a bad credit rating, who do you suppose thought it
would be a good idea to give them an interest only mortgage,
that they more than likely will have further trouble paying? You
wonder if Alan Greenspan is aware of this situation, and if he
takes it into consideration when raising the prime interest
rate? Do you suppose there's a number factor for the "really
going to default on these loans" segment of his equation that
determines our prime lending rate?
Let's hope Alan uses more foresight and plain good business
sense than our mortgage loan brokers, especially the ones that
came up with this genius idea!