Friday, February 1, 2008

It Only Seems That Way

"Why would you ever want to take on more debt than your home is worth," ask Mike.


The short answer is that when you think liquidity is going to be a problem it is always better to have money in the bank and higher debt than no money in the bank and lower debt.

A longer answer is that people often think of taking out loans so that you can buy something you want. Ultimately, this is what most people do with borrowed money. However, you can also take out loans just to have more cash in the bank.

This is what I suggested that homeowners do. You never know when you will have an emergency, loose your job, etc. If you have credit available then you can whether those situations. If not, then you may be forced into dire straits such as foreclosure.

Therefore, if you think your credit is about to dry up, its always in your interest to pull out the money now. You can put it into a high yield savings account. If you never use it then you only owe the difference between the interest you are paying and the interest you are getting.

If you do use it then it could save you.

Now, thats the responsible take. Their is a less responsible corollary. That is, if you are planning to spend way beyond your means then you might as well borrow that money at 8% from your home equity line of credit, rather than 23% from your credit card.

In either case, it is better to borrow cheap easy money then be stuck borrowing expensive money or being short of money.

Of course, it would be better still to save responsibly and be lucky enough not to have an emergency. However, many people who have decided to live beyond their means are not going to stop until they are insolvent and almost by definition its difficult to control emergencies.

I don't know if that helps, but its important not to confuse borrowing with spending. Borrowing is a lot of money is imprudent. Spending a lot of money is imprudent.

11 comments:

Mike said...

I hope more people question the ratings given to MBIA by Moody's and S&P. How can they have the highest rating? Total sham.

Anonymous said...

the bad breath report -
the cb code -
thedietsolutionprogram -
the diet solution program -
the rich jerk -
the super mind evolution system -
turbulencetraining -
turbulence training -
vincedelmontefitness -
vince del monte fitness -
warp speed fat loss -
wedding speech 4u -
windo fix -
wrap candy -
zygor guides -
7day ebook -
360 fix kit -
advanced pc tweaker -
adware bot -
affiliate naire -
art of approaching -
beating adwords -
believe and manifest -
blogging in action -
body building revealed -
burthefat -
burn the fat -
carb rotation diet -
cheat your way thin -
cold sore freedom in 3 days -
conversationalhypnosis -
conversational hypnosis -
convert 2 ev -
cure for bruxism -

Anonymous said...

cure hemorrhoids -
digi cam cash -
digital media solution -
dl guard -
driver checker -
earth4energy -
earth 4 energy -
easy backup wizard -
easy member pro -
easy tv soft -
eatstopeat -
eat stop eat -
error fix -
error killer -
evidence nuker -
fap turbo -
fatburningfurnace -
fat burning furnace -
fatloss4idiots -
fat loss 4 idiots -
final uninstaller -
fitnessmodelprogram -
fitness model program -
flatten your abs -
gamers testing ground -
gov auction -
governmentregistry -
government registry -
gov records -
herbal hair solution -
homebre ware -
home job group -
homemadeenergy -
home made energy -

Anonymous said...

inteli gator -
joanas world -
joyful tomato -
kidney stone remedy -
learn digital photography now -
learn elements now -
linden method -
lose man boobs -
malware removal bot -
maternityacupressure -
maternity acupressure -
meet your sweet -
muscle gaining secrets -
muscle gain truth -
niche adsense themes -
ninety day powerseller -
pc optimizer pro -
pregnancy miracle -
pregnancy without pounds -
privacy control -
publicrecordspro -
public records pro -
quit smoking today -
reg genie -
registry easy -
registry genius -
registry smart -
registry winner -
registry winner download -
retrievea lover -
reverse mobile -
richard mackenzie direct -
rocket italian -
save my marriage today -

Anonymous said...

secrets book -
seo elite -
spyware cease -
spyware remover -
spy zooka -
stock assault -
talking to toddlers -
the action machine -
thebadbreathreport -
the bad breath report -
thedietsolutionprogram -
the diet solution program -
the rich jerk -
tonsil stones remedies -
top secret fat loss secret -
turbo cash generator -
turbulence training -
twitter online system -
uncle sams money -
underground hypnosis -
vincedelmontefitness -
vince del monte fitness -
warp speed fat loss -
water 4 gas -
wedding speech 4u -
wp goldmine -
wrap candy -
xsite pro -
zygor guides -
37 days to clean credit -
advanced defrag -
adware alert -
adware bot -
affiliate prophet -

Anonymous said...

affiliate video brander -
anti spyware -
art of approaching -
atomic blogging -
auction classified cash -
automated cash formula -
bbq book -
bloggers pay check -
blogging in action -
body building revealed -
burnthefat -
burn the fat -
carb rotation diet -
cheat your way thin -
chopper tattoo -
cleanup the profits -
cold sore freedom in 3 days -
commission blueprint -
conversationalhypnosis -
conversational hypnosis -
cure for bruxism -
declutter fast -
driver checker -
earth4energy -
earth 4 energy -
easy member pro -
easy tv soft -
eatstopeat -
eat stop eat -
fap turbo -
fatburningfurnace -
fat burning furnace -
Afatloss4idiots -
final sync -

Anonymous said...

final uninstaller -
fitness model program -
fit yummy yummy -
flatten your abs -
forex ambush -
governmentregistry -
government registry -
healthy urban kitchen -
homebrew installer -
homemadeenergy -
home made energy -
instant article wizard -
jamo rama -
joyful tomato -
lose man boobs -
lower body make over -
maternityacupressure -
maternity acupressure -
maverick money makers -
meet your sweet -
muscle gaining secrets -
muscle gain truth -
natural cancer treatments -
niche review templates -
nyhms warcraft guides -
pappa pc -
pc booster -
pc optimizer pro -
pc secret formula -
pda flix -
privacy control -
publicrecordspro -
public records pro -
push button ecover -

Anonymous said...

reg defense -
reg genie -
registry easy -
registry genius -
registry smart -
registry winner -
registry winner download -
reverse mobile -
richard mackenzie direct -
rocket japanese -
rotator cuff training -
save my marriage today -
secrets book -
silent sales machine -
silver lotto -
spyware cease -
super affiliate handbook -
the 11 forgotten laws -
thebadbreathreport -
the bad breath report -
thedietsolutionprogram -
the diet solution program -
the power pause -
tmj help -
tonsil stones remedies -
top secret fat loss secret -
turbulence training -
twitter rockstar -
uncle sams money -
underground hypnosis -
vincedelmontefitness -
vince del monte fitness -
warcraft millionaire -
warcraft wealth -

Anonymous said...

warp speed fat loss -
webcomp analyst -
wedding speech 4u -
win back love -
your software website -
zox pro -
zygor guides -
500 love making tips -
acid alkaline diet -
acne no more -
advanced defrag -
adware alert -
adware bot -
affiliate elite -
anti spyware -
anti spyware bot -
article bully -
art of approaching -
auto pilot profits -
bbq book -
blogging in action -
body building revealed -
burnthefat -
burn the fat -
carb rotation diet -
chopper tattoo -
conversationalhypnosis -
conversational hypnosis -
cure for tinnitus -
debt free in three -
driver checker -
duplicate file cleaner -
earth4energy -
earth 4 energy -

Anonymous said...

easy member pro -
easy tv soft -
eatstopeat -
eat stop eat -
end your tinnitus -
fap winner -
fat burning furnace -
fatloss4idiots -
fat loss 4 idiots -
final sync -
final uninstaller -
firewall gold -
fitness model program -
fit yummy yummy -
flatten your abs -
forex auto money -
forex auto pilot -
forex confidante -
game tester guide -
governmentregistry -
government registry -
healthy urban kitchen -
higher faster sports -
homebrew installer -
homemadeenergy -
home made energy -
i am big brother -
instant profit machine -
i want a teaching job -
joyful tomato -
lose man boobs -
lower body make over -
macro virus -
magic of making up -

Anonymous said...

make money taking surveys -
malware bot -
maternityacupressure -
maternity acupressure -
meet your sweet -
moles warts removal -
money siphon system -
muscle gaining secrets -
my airfare secrets -
my miracle loans -
my out of control teen -
natural cancer treatments -
ovarian cyst cures -
pc optimizer pro -
piano for all -
prevent sweating -
privacy control -
publicrecordspro -
public records pro -
pvp bible -
quick article pro -
quit smoking today -
reg defense -
reg genie -
registry easy -
registry genius -
registry smart -
registry winner -
registry winner download -
reg tool -
relationship headquarters -
reverse mobile -
richard mackenzie direct -
rocket japanese -