Stay Right Side Up Not Upside Down

Stay Right Side Up Not Upside Down

Author: Jack Tanner

Are you "right side up" or "upside down?" Well, if you’re one of the millions of people in the country who have more month left over at the end of their paycheck, the chances are you're upside down. That's the term lenders use to describe people over their head in debt and spending money faster than it's coming in.

There was a time, a generation ago, when mortgage lenders were extremely conservative. If you had a low income or poor credit, you had to rent, because you'd never get a mortgage.

But that's all changed. The mortgage industry today is a totally different ballgame. It's huge and highly competitive. In order to compete, aggressive lenders sometimes promise anything – low payments, low interest, no credit check, no appraisal, etc. – just to get their hands on your business.

Advertisements for home equity loans and home equity lines of credit are found all over. I'm sure you've seen them – on TV, in your mailbox and on the web. Your home is probably your most valuable asset. Putting it up as collateral is touted as "the perfect way to consolidate your debts." But, think twice. All that glitters isn't gold.

"Borrowers Beware!" the Federal Trade Commission warns people looking at home equity loans. Why? Because there are a lot of unscrupulous lenders out there gambling on the fact that most homeowners can't manage their debt. They're counting on you to go right out and run up your credit cards again after you consolidate. And, according to statistics, the chances are you will.

That's why unethical lenders are willing to take a risk on homeowners with low incomes and poor credit. They have nothing to lose and they always win. If you pay off your mortgage, they make money. If you don't pay it off, they make money. They'll foreclose at the drop of a hat, sell your home and run off with all the equity you put into it. In this scenario, you end up with nothing to show for all your hard work and effort. Not even a roof over your head.

Consider these facts. Nearly a million homes went into foreclosure last year and the number is rapidly increasing. In California alone the foreclosures doubled. As the once-booming home market continues to soften (home prices recently had their biggest decrease in 35 years), more and more people could find themselves "upside down" in debt. And second mortgage debt consolidation home equity loans are one of the major causes of mortgage defaults.

So, think twice when considering a home equity loan or home equity line of credit to "consolidate debt." Second mortgages can be risky. Ask yourself if you're going to be able to resist the enormous pressure to spend more money. The average consumer is bombarded every day with more than 3,000 marketing messages to "Buy, Buy, Buy!" Will you just max out your credit cards once again?

To be safe rather than sorry, you better know you can control your spending before you take on a second mortgage – that is if you want to stay "right side up" and keep your "home sweet home."

Jack Tanner blogs about his experiences with home equity loans rate at www.HomeEquityLoansZone.com. Stop by and learn all the tips and tricks he's used over the years to take advantage of home equity loans.