Habit-Forming: Borrowers Keep Piling On Debt...

[babylonsister]

Habit-Forming: Borrowers Keep Piling On Debt As Lenders' Tighter Standards Cut Off Some Avenues, People
Tap Credit Cards, Equity Lines
By JANE J. KIM
April 10, 2008; Page D1


The credit crunch has made it harder for Americans to indulge in their love affair with debt. So what are they doing?

Borrowing more.

While tighter lending standards have cut off all but the most credit-worthy borrowers from auto loans and home loans, many people are turning to credit cards and tapping more of their home-equity lines of credit to dig themselves in deeper. And lenders, once eager to lend to those with even spotty credit records, are trying to rein in borrowing by cutting consumers' available credit lines.


Average balances on credit cards and home-equity lines of credit are growing rapidly, rising 9.5% and 8.1%, respectively, in the first quarter from a year earlier, according to new data from Equifax Inc. and Moody's Economy.com.

Borrowing is climbing quickest in the regions where house prices plunged most sharply, making it tougher for people to extract money in cash-out refinancings. (In a cash-out refinancing, a homeowner pays off a mortgage by taking out a loan that is larger than the original mortgage and then pocketing the difference.) Credit-card balances rose nearly 15% during the first quarter from a year earlier in California and Florida and more than 20% in Nevada -- all states caught up in the housing bust, according to Equifax and Economy.com.

The rise in borrowing shows just how addicted the U.S. consumer has become to credit. Even as borrowers are cut off in one area, they promptly look for new sources. Workers have increasingly been raiding their 401(k) plans to take out loans over the past year, according to plan administrators and nonprofit groups.

more...

http://online.wsj.com/article/SB120779065895103637.html?mod=googlenews_wsj

[tanyev]

1. I didn't know you could get cash against a car loan until we saw

a brand new sign today on a building that has been vacant for a long time. First one I've seen in this area. The city government just announced a hiring freeze since sales tax revenue is way down and they're very worried about budget shortfall this year. Signs of the times.

[SoCalDem]

2. Sad, isn't it?

"Credit" and E-Z credit replaced salary increases and pension funding..

People will always have needs, and if they cannot meet those needs with the money they HAVE, they will find the money elsewhere....by borrowing it..

It's amazing ...we have no debt other than our mortgage, and we have plenty of money..BUT when we had credit cards, we had NO money..Every last "extra" dime went to service that debt....and back then we had TWO decent incomes 9now we have but one)

The kindest thing you can ever do for yourself and your family is to be debt-free..

It's not what you HAVE..it's what you OWE!!

[babylonsister]

5. Really sad! We got rid of the cc's, too, several years ago, and I'm

very grateful we did. Now we're working on paying off the mortgage, then we'll consider ourselves debt-free. I'd be very worried if I was forced to live this way...and angry.

[bluestateguy]

3. I paid off my CC's last month

It's a great feeling.

Better than sex.

[malaise]

4. I recommend that families take some time out this summer

and take a good look at some of the crap they bought because they thought they needed it. After a rational discussion that includes the children, every time they think of buying the latest fad, they should rationalize the purchase in advance.

Sp.

[TwixVoy]

6. Using a house as an ATM machine

Stupid stupid stupid!

[Elspeth]

7. See THIS VIDEO in DU

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=385x116794