Forgive me; my head is racing. It's not often I hear about a financial move so monumentally stupid that I'm blitzed by potential story titles. But when the Associated Press reported that desperate Philadelphia Eagles fans were borrowing against their homes for game tickets, I struck headline gold:
Philly's Financial Idiocy
Egad, Eagles Fans!
Winning the Super Bowl of Stupidity
Diehard Fans; Dunderheaded Finances
Robbing Peter to Play Ball
As one financially challenged follower told the Associated Press: "Sometimes the cards are maxed out, and you gotta do what you gotta do." What he had to do was apply for a $4,000 home equity line of credit to pay for a Super Bowl package.
How about this option: If you can't afford it, you don't gotta do it.
If you think I'm being overly harsh, let me remind you of something: Legend has it that these people once booed Santa Claus off the football field. If anyone can handle tough love, it's Philly fans. But don't expect bankers to dole out the tsk-tsks. Said one to the AP about fans taking out these lines of credit: "If I had any equity left in my house, I probably would, too." And this from a mortgage banker: "Some people don't care if it costs them $100 more a month" on their mortgage to pay off the loan. "But I'll stand by it, if they want it."
Of course he will. A home equity line of credit is a classic in the mortgage broker's playbook; today's small loan can add decades to a homeowner's payoff schedule. And it is the right choice in some circumstances. It doesn't take much to persuade customers to play ball these days, particularly with soaring home values and down-to-earth interest rates.
It is true that a home equity loan, mathematically speaking, can be a better bet than borrowing on your credit card. If you pay only the minimum amount due, a $4,000 Super Bowl package on plastic at 14% interest will take 20 years to pay off and nearly double the price. Mortgage interest, on the other hand, is often tax-deductible -- two magic words to cash-strapped football fans.
But the justification is hardly worth it, particularly when you learn what's really at stake. Credit card debt is what they call "unsecured debt" in biz-speak, while home equity debt is the opposite -- "secured debt." It's like a security deposit for the lender. That means if you lose your job or have some sudden financial emergency and can't cover your home-equity loan, your house is on the line. Try hosting a Super Bowl party from the trunk of your car.
Go ahead and lose your tempers, Philly fans. Boo Santa Claus, orphans, red shirts, puppies, and your grandmother at the first sign of New England Patriots leanings. Bring it on. Just don't bet the house on your home team.
Have you ever been blinded (and then bankrupt) by love? Financially sideswiped by a boneheaded money mistake?Me, too! Let's commiserate. Email me (at[email protected]) the stupidest financial mistake you've ever made, and I'll send a Fool ballcap to the biggest loser. C'mon, take one for the team. I promise to use only pseudonyms when I retell your story.