Comment by matheusmoreira
3 years ago
> I'm going to guess that either you already own your home and your car outright
Partially correct.
Yes, I own my car. While I was in school my family bought the cheapest used vehicle there was so that I could go to classes. After I graduated, I continued using that car until I had made more than enough money to buy a new one. I have friends who took on massive amounts of debt in order to have luxurious vehicles right after graduation. I will never do something like that.
Yes, my family owns their homes. Both my parents worked jobs while renting an apartment until they had enough to buy the home I grew up in and in which they live in to this day. It took a lot of effort.
Yes, my education was fully paid for in advance. My parents prepared and planned for it since the day I was born. My father showed me his careful accounting on his ledger, entries dating back decades.
> Or you're wealthy to the point of being able to pay cash or make major purchases without having to save for a while.
Wealthy enough to pay cash? I guess. Without any planning and saving? No.
> Credit allows me to buy the house NOW and start building equity NOW.
What did you really buy? Fail to make your payments and see the true owners of your house take it away from you. None of it is real until the payments are done.
> Student loans were a good idea, but ended up with disastrous side effects
Of course. That about sums up the entire history of credit and debt. A great idea that destroys everything.
> But to argue for the abolishment of credit because some people suck at it is just throwing the baby out with the bathwater.
> It would absolutely destroy the middle class and kneecap upward mobility of the lower class.
On the contrary. Credit and lending are literally responsible for global economic collapse. It destroys the lives of so many it's not even funny.
> Fail to make your payments and see the true owners of your house take it away from you.
The notion that the collateral for a loan could be repossessed because of non-payment is not convincing.
I still own the house. I can make decisions regarding modifications to it without seeking permission from the bank that loaned the money to me, even if such modifications would lower the value.
> Credit and lending are literally responsible for global economic collapse. It destroys the lives of so many it's not even funny.
No, bad credit and lending are responsible. Sub-prime mortgages, ARMs, and "balloon" mortgages.
In your fantasy world where credit no longer exists, home ownership would drop considerably. Very few people would be able to save the money to buy a home because they would have to pay rent while saving up the money. When I bought my house in 2015, I was paying about $1,000/month for rent. The house I bought is costing me $1,500/month for 30 years ($320K @ 3.85%).
Obviously, that $1,500/month includes interest. A lot of it. So let's assume instead I'm saving money and living in that apartment still. Assume that I'm risk-averse and don't invest my money. At $1,500/month, it would take me 18 years of saving to buy that house
Oh, but home prices are almost always going up. The $338K house (I put $18K down, and most of that was a gift from my in-laws) I'm in is currently worth $550K. It would take 30 years of saving to buy this house at that price.
And the worst part is, the entire time, I'm still paying rent somewhere. And that rent is always going up as well! I would need to have a very considerable amount of disposable income in order to save up to buy a house! In 2015, I could afford a $1,500 mortgage. I could NOT afford to pay $1,000/month in rent AND set aside $1,500/month for a house in the future!
So...you'd significantly reduce how many people could buy a house. You'd think "Well, the lower demand would lower prices!", but that's probably wrong. What would happen is that real estate investors would buy up the houses. The big banks already have the cash on hand. They buy them up, rent them out, and further lock people out of homeownership.
Wealth inequality grows, and the economy suffers. The rich get richer as they extract money via rent, building more wealth to buy more houses to rent out.
Your parents were able to buy a house while home prices relative to wages were better. Good on them. But to eliminate the idea of credit now would be a real "I got mine" move.