If there's such a credit crunch, why is everyone trying to lend me more money?

[Dr.Phool]

I get probably 3-5 pre-approved solicitations in the mail every day. Offers for mortgages, equity lines of credit, and credit cards.

I took out a home equity loan about a month ago in order to buy a pizza shop. They wanted to give me more than twice as much as I asked for at prime.

:wtf:

I know that they're tightening standards and stuff, but are they trying to accelerate their collapse? Even I know I don't deserve that much money. Especially in this economy.

[FormerDittoHead]

1. Was that a fixed or variable rate with balloon?

Just wondering about that home equity loan.

[Dr.Phool]

4. Fixed, 10 year amortization.

[FormerDittoHead]

7. Wow. I guess they're trying to better the risk portion of their loan portfolio...

...that's a good deal, though...

[Donnachaidh]

2. Because they are trying to feed the beast

Banks don't make money if people stop taking on credit. They make money when people take on more credit. You'll probably be seeing more of those pre-approveds being sent out, because they need to balance out the defaulted problems.

Good luck on your pizzaria!

[Dr.Phool]

6. Haven't yet closed the deal.

We're at the stage where we're going over all the books with an accountant, projecting costs, improvements, etc. But, the money is sitting there, if we decide to move on it, or something else.

[Fresh_Start]

3. Apparently you look much better than their average existing customer

They are trying to bring in 'good assets' to dilute the effects of the poor assets.
Unfortunately, it never works because 'good assets' quickly become conservative in borrowing/spending when they feel an economic risk and the poor assets don't

[Milo_Bloom]

5. From their perspective, it makes sense.

First, congrats on buying a pizza shop! I hope it does really well! I don't know where you are located, but if you happen to be in the So Cal area, post your location, I am always up for trying to find good Pizza out here!!

Now, onto the answer... just like bubbles, collapses don't last forever. They would rather give you double what you need now and thereby give you enough money to ride the storm out, than foreclose in a short amount of time. If they only gave you half of what you could get, you might not have a buffer if the crunch lasts a little longer than expected, but, by giving you a buffer zone, you will be able to keep up on your payments even if things take longer to recover. By the time the money is actually gone, the market will most likely have recovered enough for either one of 2 things. #1) You can refinance and consolodate because your home's value has increased OR #2) It has become WORTH IT for them to forclose.

[guruoo]

8. That's easy. You see, they still have yet to own every dime you will make

for the rest of your life.