posted on Mar, 1 2009 @ 03:05 AM
There's one major trend I see on ATS in the Global Meltdown and Survival forums which always leaves me scratching my head. I understand and fully
agree with paying legitimate debts you owe on, in fact I'd say that people who are looking for an easy out way of defaulting on those debts are a
major part of our economic problem. However, I don't see the point in so often seeing members suggest people should be scrambling to accelerate
their debt payments, paying as much over the basic monthly payments as possible to eliminate it all.
There are two main problems I see with that advice.
1. IF (and I'll be honest, to me it is an 'if' and not a certainty at this point) we suffer a complete monetary collapse, our money will
essentially be worthless. However, any fixed rate debts you are carrying will still be payable in that "worthless" currency. For example, if you
have a fixed rate loan which you owe $20,000 on with $300 a month minimum payments, even if a loaf of bread suddenly costs $100, your loan will still
"only" be $20,000. That means anyone who has prepared themselves properly could find that they can suddenly pay off these loans with no real added
hardship to themselves vs scrimping today to pay them off in larger chunks while our money is still very far from worthless.
2. IF (again, not a certainty, but a more likely scenario, I would hope) we do not see a complete collapse, but rather face some period of high
inflation, by paying more today you're basically paying with money that's worth even more than it has been worth in quite some time and more than it
will be worth in the near future. If we're seeing deflation currently, then that means the buying power of your money is greater right now and by
paying more to whoever holds your loan, you're essentially pissing away that buying power right now, when you very likely need it the most.
My strategy on this (and mind you, I have no credit card debt, own my vehicles outright, and lease my house... my only real debts are student loans
and standard monthly bills) is that any secured loans you may have (mortgage, car loan, select credit card debt) you might wish to pay off now if
you're worried about your future abillity to earn enough to keep paying on them. The rest of it, however, especially any unsecured debt, screw it.
Pay your basic monthly payments and put any extra money you have away or invest in durable or tradeable goods if you're convinced we're headed
towards certain disaster. Let's be honest here, if we do end up in a massive depression, and if you do lose your job, your American
Express/Visa/Mastercard bill is going to be the least of your worries, as is any unpaid medical bill or store credit bill. We do not have debtor's
prisons in this country (at least so long as it isn't back taxes or court ordered payments you're indebted to), and I highly doubt we will ever
reach that point. The worst case scenario (aside from total Armageddon, of course) is that when we come out of this your credit rating is shot for
7-10 years. I'd think that regardless of people's credit rating, we're not going to see very many people getting decent credit for a number of
years after this even if they did carefully pay their bills. In all likelihood, we'll return to a pre-1980's level of credit where your credit
history is secondary to your overall abillity to pay off any loan you get regardless.
Just my opinion, mind you. I'd love to know the rationale behind paying these off as soon as possible because I'm just not seeing it.
[edit on 1-3-2009 by burdman30ott6]