A bank is a pla“ ce that will lend you money
if you can prove you don’t need it.”
Financial institutions lend against your monthly Your ability to keep all your monthly payments cur-
stable income for repayment, but they attach your rent and protect your credit scores becomes unimport-
house as collateral to protect them in the event of non- ant when you’re having difficulty feeding your family
payment. The value of your property is considered in and keeping utility companies from disconnecting
the loan approval because the banks know a borrower your gas or electric service. You find yourself thrown
will work harder to make payments if he’s got a large back into the very basics: first food…then clothing…
amount of his own cash in the collateral. then shelter. (Remember Maslow’s Hierarchy of Needs
from psychology class?)
If big equity in your house makes the bank’s position
stronger, what does this mean for you, the borrower? Getting food and keeping warm often become priori-
You’re smart, you’ve got that one figured out. You are ties over paying those pesky monthly payments. But,
in a weaker position than the lender when your eq- here’s the problem. The inability to keep up payments
uity is high. You can have a beautiful house with no places you at risk of foreclosure. Yes, they can come
mortgage balance remaining, but that position alone and take away that lovely house, even if your equity
doesn’t guarantee you a loan. This remains true even position is high. If you don’t continue your monthly
when your employment predicament is temporary. payments, you lose your house – even if you’ve paid
Strong and long job time, steady income and good extra payments in the past or made a huge down pay-
credit scores are the strengths that get you a loan. Un- ment when you bought it.
employment doesn’t bode well for approval.
If you had separated that equity and sheltered it into
Often, in situations of job loss, disability or medical is- an accessible, safe side fund, you could tap it to make
sues, credit problems begin to bloom. Recent late pay- your payments. Those funds could see you through
ments can devastate your credit scores, which are the your rough spots and put your concerns at ease. Think
pivotal element in the decision to lend you money. The how great it would be to have options if catastro-
number one reason for home foreclosure in America phe were to strike. You would keep control and have
is disability. When this word is mentioned, most of us power over your life. I don’t know about you, but I
think of physical disability, but financial disability is would rather be in that position of power, maintaining
also a very real threat. If you lose your job or become control over my life, that the alternative position of
unable to work, additional financial liabilities often helplessness and vulnerability. Wouldn’t you?
come along for the ride.
Continued on page 36
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