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Money Classic: A Man Borrows $87,000 in Four Days (1994)

Money Classic: A Man Borrows $87,000 in Four Days (1994)

Silver is 50 years old! To celebrate, we’ve scoured decades of our print magazines to uncover hidden gems, fascinating stories, and vintage personal finance tips that have (surprisingly) stood the test of time. Throughout 2022, we’ll be sharing our favorite finds in classic silvera special limited-edition newsletter that comes out twice a month.

This excerpt, featured in the sixth issue of Money Classic, is from a story in our February 1994 edition.

LOW RATES! PRE-APPROVED! NO INCOME CHECKS! SIMPLE TERMS! Your mailbox and newspaper are full of tempting offers for mortgages, home equity margins, credit cards and car loans. But is it really that easy to shake the money tree? With many taxpayers facing surprisingly high bills on April 15, thanks to last year’s tax increases, we asked Money correspondent in Portland, Oregon, Jeff Wuorio, 36, to see how much money he could borrow on short notice for taxes or other emergencies. (For this exercise, we told him to align pre-approvals with loans, not to act on actual requests.)

His report :

At first, I wasn’t sure I was made for this mission. The truth is, I hate owing money. Of course, my wife Judy and I have a mortgage—it’s unavoidable. But we own both of our cars up front and refuse to carry credit cards. With a family income of around $70,000 a year and a one-year-old boy at home, we’re not big spenders – with credit Where cash. It turned out, however, that my debt-free status made me the right person to raise a lot of money quickly.

FIRST DAY, 11 a.m. I begin my quest with Glen Clemans, my financial planner. He suggests that I open a margin account at a brokerage firm with my three mutual funds (worth a total of $44,150). Once the account is opened, I will be able to take out loans using the funds as collateral. Glen offers to check all the details.

11:10 a.m. Years ago I purchased a $100,000 single premium life insurance policy. I call Alexander Hamilton Life, the underwriter, and learn that I can borrow almost all of the current cash value, or $13,745, simply by writing a letter to the company requesting a loan. I can repay the money whenever I want – or not at all. But I will have to start paying a monthly premium of $47 to keep the policy in force. Still, I made my first score: $13,745 and counting.

11:30 a.m. Last year, Judy and I bought $1,500 worth of furniture under a plan that allowed us to avoid finance charges if we paid the bill within 90 days. Naturally, we made sure to send a check for the full amount on the 87th day. Since then, American General Finance, who handled the invoicing for the furniture store, has been sending letters offering to lend us more – I guess they want another chance to collect some interest from us. When I call to tell them about it, a woman suggests a home equity line and happily asks how much we need. Thinking big, I say $50,000. She will call me back.

1:30 p.m. Appeal from Glen Clemans. Discount broker Charles Schwab will let me open a margin account with my existing mutual funds. I will be able to borrow up to 50% of the account value, or $22,075, at 6.75%, no questions asked.

Two phone calls and I got $35,820. Just reach out and touch someone!

2:15 p.m. I head to First Interstate Bank, where we have a checking account. A customer service representative offers a personal loan “Advancelines”. I repeatedly ask how much I can borrow, and she repeatedly says I have to apply to find out. That hardly seems fair. The only place I have trouble borrowing is the bank.

3:15 p.m. I call American General Finance again, reaching a man who says he has my file on his desk. I tell him we have an $89,000 mortgage on our house, which was appraised last year at $133,000 but would probably pay $150,000 today. He says I would qualify for a line of credit of $31,000 (80% of the $150,000 estimated market value of my house, less the existing mortgage) at 10% interest. I ask if this conversation constitutes pre-approval and he says yes, pending further evaluation. He adds that the whole process would take around three weeks and that “you can use the money for anything you want”. Now I’m at $66,820. The possibilities seem endless.

5:05 p.m. I phone Judy’s mother, Flora, who we have a close relationship with (although I wonder how close it will be once we start asking her for money). I explain that this is just a test, and Flora replies that in a real emergency, she could probably lend us $5,000, charging us the same rate as on her savings: 2, 6%. This is the best offer we have received so far. I’m at $71,820. No more mother-in-law jokes from me.

DAY TWO, 10am Clutching a silver tea set left to us by my parents, I visit a few pawnshops. Inheritance or not, a loan is a loan. A pawnbroker tells me the service is actually silver plated and sniffs that it’s not even a matching set. He offers me $25 for four servings, at the maximum state-imposed interest rate of 3% per month, or 42.6% per year. The $25 gets me to $71,845. What kind of goods, I ask the pawnbroker, can you pawn for real money? Jewelry and firearms, he said. Shoot, I say.

DAY 3, 12:30 p.m. Knowing that religious organizations sometimes come to the aid of their members, I call the Jewish Federation of Portland, the only such group with which my wife or I can plausibly claim a connection. I was referred to a related group – the Jewish Family and Children’s Service – and told that such loans are only available for “difficult” cases.

12:45 p.m. I try a loan company listed in the phone book – Norwest Financial – and ask if I can get a loan against my 1990 Isuzu Trooper. I leave my name and number.

2:45 p.m. A man from Norwest Financial calls and says that depending on my credit and the condition of my Trooper, I could borrow $5,000 to $13,000, at an interest rate of 16% to 25%. For the sake of my count, I guess I would get the median: $9,000. I’m down to $80,845 now but I’m out of ideas – and out of collateral.

DAY FOUR, 11:30 a.m. Have the credit gods heard my pleas? In the mail today, I find a pre-approved Visa card application with a $6,500 line of credit. I call the issuing bank. Jackpot. All I have to do is bring my Visa card to any bank and I can get the full $6,500. Triumphant, I add up my earnings – er, the loans: $87,345, or about $1,200 an hour. Combined with my mortgage, that gives me borrowing power of $176,345, or about 2.5 times our annual family income, or 60% of our assets.

If I actually filled out the applications, it would all be in my paws within three weeks, ready to be used to buy whatever goodies I wanted, or maybe pay taxes imposed by others. Then the only thing I would have to worry about is how many years it would take me to pay back what I amassed in four short days.

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