No. 173



In my early days, when I was a kid growing up, we lived so far out in the country they had to pump sunshine in to us and when we wanted to go hunting, we had to come back toward town. Now we live much closer to the city and things are different. We have indoor plumbing and even have a telephone. Now, hopefully you realize that I am just kidding and I don't want to insult your intelligence like some people insult mine. The other day I got something in the mail from a home equity loan company that is located in another state that seems to be typical of the times. The top third of this sheet of paper was designed as a check from this company in the amount of $42,800. Where they got that number I'll never know but printed across the middle of this fake check were the words 'This Is Not A Check.'

Being as perceptive as I am, of course I knew this was a direct mail appeal for me (and it was made out to me, not jointly) to take out a second mortgage on our home in the amount that I stated earlier. In the letter below this fake check, they stated that if I wanted to increase or decrease this amount, just call the agent listed below. They were also liberal enough to say that I could receive these funds even if our property had no equity and if my credit had suffered in the past. The one thing they failed to do, however, was state the rate of interest for the loan.

Now, I would like to turn my comments to a more serious note and talk with you about the massive number of appeals for easy credit and debt consolidation. There is not a week that goes by that I don't see from 10 to 15 advertisements for loans of this type, and all tied to a tangible assett...our home. There is one big catch in all of these advertisements however, and that is the money has to be paid interest.

Apparently there are millions of people who are taking out these 2nd mortgage or debt consolidation loans or these companies would not keep up this level of advertising. Please don't misunderstand what I am saying here. I certainly believe in advertising and I also believe in credit, if it's used wisely. The problem comes for individuals and families, who do not exercise good judgement and wind up losing their home a few months or years down the road, and that's my real concern.

The reason these types of loans are attractive is because of what easy credit has done to millions of credit card users over the past several years. When a person is 'maxed out' and their level of income is not sufficient to continue with their acquired life style, there are hard decisions that have to be made. Unfortunately, in many cases the decision is bankruptcy. For others, it's taking out a home equity loan which reduces the amount of their payments each month.

Before I share the real problem, I would like to say that I realize this is a free country and every responsible adult can make his or her own decisions. My purpose here is not to try to tell you or anyone else what you should do. I just wanted to share some insights that may be of value to you or someone who seeks your council about taking out a loan of this type. There is a real pitfall for this type of loan and I hope you will think seriously about what I am saying.

These loans may be good over the long haul only if the individual is willing to change his or her behavior and their spending habits. Otherwise, the home equity loan will serve as a false sense of security and the debt will continue to grow and there will be a time when it must be paid. Unfortunately, that sports star that has been hawking the loan is not going to help repay it. If a real emergency should arise, it could be "the straw that broke the camel's back." I care !! (Jim Davidson is a motivational speaker and syndicated columnist. You may contact him at 2 Bentley Drive, Conway, AR 72034.)