Stressed borrowers use plastic to delay default

When I read stuff like this, I think our economic implosion may turn out to be far worse than I fear:


CHICAGO (Reuters) - This may be Johari Reeves' last chance to catch up on her mortgage payments. The credit cards, she'll worry about later.
(snip)
Rising mortgage payments and tighter lending standards for refinancing amid the subprime credit crisis have dried up once-easy access to home equity loans for many middle-income borrowers -- so desperate borrowers are using credit cards to cover basics while trying to keep up with home payments.

"When credit conditions dry up, marginal borrowers turn to plastic," said Merrill Lynch North American Economist David Rosenberg. "We're seeing signs of that already."

In an October 5 research note, Rosenberg called rising credit- card delinquency rates as the "next skeleton in the closet."




http://news.yahoo.com/s/nm/20071028/lf_nm/usa_creditcards_debt_dc;_ylt=AjM_Meno9Ysiy4Rj6A_jCYsDW7oF

This implosion is just getting started! I always wondered how people in my area could afford their 250,000 dollar homes & 100,000 dollars worth of vehicles in the driveway. Easy credit baby!

because more and more people are turning to plastic to supplement their inadequate wages as inflation skyrockets. They no longer have any hope of inflating housing prices to allow them to refinance to pay those cards off. Now the unsecured debt is just starting to pile up with no net worth to offset it.

Right now, those minimum payment amounts are lulling people into a false sense of security, making them think that putting a fifteen hundred dollar mortgage payment on that card in return for another hundred and fifty dollars a month in minimum payment is a good deal.

Once that credit card debt starts to tighten up and those minimum payments start to escalate, the whole house of cards will fall.

You had to have... you know, like a good credit record.

Now, they're practically giving away pre-approved credit cards in cereal boxes.

A LOT of people borrowed heavily for major expenses like healthcare. They had to.

Some others were just tragically naive. They accepted the lifestyle that was promoted to them at every turn, and they got into trouble that way.


:(


My parents always believed in avoiding debt like the plague, and I'm the same way, but I think that most people will tend to conform to the larger culture.

in bankrupcy, thanks to Congress. Talk about being screwed from all sides...

I truly think we're about to go into a depression.

but I didn't want to buy new, so I checked out craigslist.
I found some fabulous furniture at a GREAT price.
When I got there to pick it up, this was a young married couple. For Sale sign on the house, but they were moving out that weekend into an apartment.
She was a hairdresser, he was some kind of sales rep.
EVERYTHING in their house was for sale.
Their home had been professionally decorated. The furniture was all like new.
They even had a sauna in the garage.
I wasn't specifically told that they had gotten themselves in over their head, but by the outside looking in (and the fact that I make much more than they do and I couldn't afford what they had)--they used a lot of credit.
I got all of this furniture (including a sofa table, the floor lamps, the decorations...everything, for $900. It was like new and is very high quality.

I wonder if TV doesn't have something to do with it. TV shows them the lifestyle and they think it's achievable.

Their home was beautiful...I'll give you that.
But I guess I have learned over the years to pay as you go.
There isn't anything I have that anyone can take away.
I can't imagine getting the home of my dreams, furnished to the nines, then watch it all go away.
Very very sad.