The Malachi Group

Financial Responsibility
“Financial responsibility” those are some words that are sometimes difficult to understand and interpret. With our economy in disarray, high unemployment, and declining real estate values, many of us have a rather bitter taste in our mouths. We may feel that we have been wronged when we bought and financed as much house as we could afford in the best of times. Now we owe more than our houses are worth and there is no appreciation in sight.
Some of us have taken on a lot of consumer debt, because it was made available to us. Now we are faced with increasing monthly credit card payments and higher interest rates. We hear stories of people who are able to call credit card companies and negotiate lower interest rates, maybe even to zero, and lower payments. There are even times that the credit card companies will forgive part of the debt. Hearing those stories makes us think about taking the opportunity to do the same.
In the past few months while in conversations with consumers, I had two people tell me that they do not mind “stiffing” the credit card companies either by debt reduction negotiation or by bankruptcy. The reason they felt as they did, involved both of them buying a personal computer and financing 100% of the purchase price on a credit card. The interest rate was high and both had taken the opportunity to tell me that they had paid for that computer two times over. Now they still owe close to the purchase price of the computer. I asked them both if they saw the interest rate and payment amount on the loan/credit card before they made the purchase. They both had. When asked if they realized they promised to pay that amount, at that interest rate, they answered affirmatively. When I asked if they felt they were taken advantage of, they both answered with a resounding – Yes. I asked if they were still using the computers and they confirmed that they are.
So where does our financial responsibility enter into the scenario I described above and what is our financial responsibility with situations in our own lives?
If we understand the loan, the loan provisions, and the use of the money, I believe we are responsible for repayment as long as we are able. Unemployment and reduced income change things. If we are not encountering unemployment or reduced income, I hope that we will take an ethical stand and say, “I am responsible for what I purchased”. Recognizing that we did have the understanding then and now. We may be angry because it has not worked out the way we wanted the event to work out but we are still responsible for the loan.
What I just described are the circumstances of a purchase. If we purchased real estate purchase, computer, or other things, and we were taken advantage of because we did not understand the conditions of a loan that is an entirely different situation.
However, if we go into a legal transaction and give our promise to pay, and understand the loan terms, then we have a legal, moral and ethical responsibility to pay as we promised to pay. We may work with the creditors to alter interest rates and payments, but the final voice comes from them. They have your promise to pay. The terms cannot be changed without their approval.
While I encouraged both of these consumers to contact their lenders and see if loan alterations could be made, both were pretty hot under the collar and were only wanting to look at getting out from under the obligation. I am not certain where that anger stems from since they both understood fully what they were getting into. As of this date, one of them has filed bankruptcy and took the computer loan into bankruptcy. The other is working to get debt reduction and settle the loan for a fixed amount that is much less than what is owed.
Both of these actions will have ramifications on their credit reports. They will be answering about their actions for years to come whenever they attempt to get another loan. The anger-based decision is seldom the one that proves worthwhile. Circumstances about those decisions will plague there credit report. Therefore, if you knew what you were doing when you signed the loan(s), isn’t it your responsibility to pay them off? Perhaps with a negotiated, lower interest rate and payment, but still to pay them in full. Negotiation with a civil, respectful tone will go a long, long way when you talk with the lender.
If someone owed you money, decided that he no longer liked the terms, the interest rate or the payment, and in anger told you that he is not paying anymore, wouldn’t you use every opportunity and every legal action to collect that debt?
Lenders have legality on their side. Consumers have the right to ask, explore and negotiate for lower interest rates, modifications and lower payments, but the ultimate decision is with the lender since they are holding our written promise to pay.
Paying off your loans in full will lead to satisfaction and gratification and you will be able to gain credit in the future much more easily than those that went through bankruptcy. Every credit application I have ever seen asks if you have gone bankrupt in the last seven years. That means very time you apply for a loan you will have to give a written reason for the bankruptcy. For some people I do understand that because of insurmountable conditions bankruptcy is what they have to do. However, that should be a last resort rather than a first option.
Let’s make a stand as responsible citizens and pay back our debt as we have promised to do. It just might change the culture of our country.