Money Classic: One Man Borrows $87K in Four Days (1994) – Money

Money is turning 50! To celebrate, we’ve combed through decades of our print magazines to uncover hidden gems, fascinating stories and vintage personal finance tips that have (surprisingly) withstood the test of time. Throughout 2022, we’ll be sharing our favorite finds in Money Classic, a special limited-edition newsletter that goes out twice a month.

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

LOW RATES! PRE-APPROVED! NO INCOME CHECK! EASY TERMS! Your mailbox and newspaper overflow with tempting offers for mortgages, home-equity lines, credit cards and car loans. But is it really that easy to shake the money tree? With many taxpayers facing surprisingly large bills on April 15, thanks to last year’s tax increases, we asked Money’s Portland, Ore. correspondent, 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 line up pre-approvals on the loans, not follow through on the actual applications.)

His report:

At first, I wasn’t sure I was right for this assignment. The truth is, I hate owing money. Sure, my wife Judy and I have a mortgage — that’s unavoidable. But we own our two cars free and clear and refuse to carry credit cards. With a family income of about $70,000 a year and a one-year-old boy at home, we’re not big spenders — with credit or cash. It turned out, though, that my debt-free status made me just the right person to raise a lot of fast cash.

DAY ONE, 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 I set up the account, I will be able to take out loans using the funds as collateral. Glen offers to check out all the details.

11:10 a.m. Years ago I bought a $100,000 single-premium life insurance policy. I call Alexander Hamilton Life, the underwriter, and hear that I can borrow virtually the full current cash value, $13,745, just by writing a letter to the company requesting a loan. I can pay the money back whenever I please — or not at all. But I will have to start paying a $47 monthly premium to keep the policy in force. Still, I’ve made my first score: $13,745 and counting.

11:30 a.m. Last year Judy and I bought $1,500 worth of furniture on a plan that allowed us to avoid finance charges if we paid the bill within 90 days. Naturally, we made sure to mail a check for the full amount on day 87. Since then, American General Finance, which handled the billing for the furniture store, has sent letters offering to lend us more — I guess they want another shot at collecting some interest from us. When I call to take them up on it, a woman suggests a home-equity line and cheerfully asks how much we need. Thinking big, I say $50,000. She’ll get back to me.

1:30 p.m. Glen Clemans calls. Discount broker Charles Schwab will let me set up a margin account with my existing mutual fund holdings. I will be able to borrow as much as 50% of the account’s value, or $22,075, at 6.75%, no questions asked.

Two phone calls and I’ve secured $35,820. Just reach out and put the touch on someone!

2:15 p.m. I head to First Interstate Bank, where we have a checking account. A customer service rep suggests an “Advancelines” personal loan. I repeatedly ask how much I can borrow, and she repeatedly says I must apply to find out. That hardly seems fair. The only place I’m having trouble borrowing from 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 fetch $150,000 today. He says I would qualify for a $31,000 line of credit (80% of my home’s estimated $150,000 market value, minus the existing mortgage) at 10% interest. I ask if this conversation constitutes a pre-approval and he says yes, pending a fresh appraisal. He adds that the whole process would take about three weeks, and “you can use the money for anything you like.” Now I’m up to $66,820. The possibilities seem endless.

5:05 p.m. I get on the phone with Judy’s mother, Flora, with whom we enjoy a close relationship (though I wonder how close it will be once we start hitting her up for cash). I explain that this is only a test, and Flora replies that in the event of an actual emergency, she would probably be able to lend us $5,000, charging us the same rate earns on her savings: 2.6%. That’s the best offer we’ve gotten so far. I’m at $71,820. No more mother-in-law jokes from me.

DAY TWO, 10 a.m. Clutching a silver tea service that my parents left us, I check out some pawnshops. Heirloom 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 matched set. He offers me $25 for four serving pieces, at the state-mandated maximum interest rate of 3% a month — or 42.6% a year. The $25 inches me up to $71,845. What kind of goods, I ask the pawnbroker, can you pawn for real money? Jewelry and guns, he says. Shoot, I say.

DAY THREE, 12:30 p.m. Knowing that religious organizations sometimes help out 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 am directed to a related group — the Jewish Family and Children’s Service — and am told such loans are available only to “hardship” cases.

12:45 p.m. I try a loan company listed in the phone book — Norwest Financial — and ask whether 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 16% to 25% interest. For the sake of my tally, I guess that I would get the median: $9,000. I’m now at $80,845 but running out of ideas — and collateral.

DAY FOUR, 11:30 a.m. Have the gods of credit heard my pleas? In today’s mail 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 take my Visa to any bank and I can get the whole $6,500. Triumphant, I add up my winnings — er, borrowings: $87,345, or roughly $1,200 an hour. Combined with my mortgage, that gives me a borrowing power of $176,345 — about 2.5 times our annual family income, or 60% of our assets.

If I actually went through with the applications, all of it would be in my paws within three weeks, ready to be used to buy the goodies of my choice, or maybe to pay the taxes others imposed. Then the only thing I’d have to worry about is how many years it would take me to pay back what I raised in four short days.

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