I was just about to walk into spinning class the other day when I received a strange call.
“Hello, is this Mrs. [PoP]?”
“Mrs. [PoP] – My name is Daniel and I’m your new personal banker at Wells Fargo.”
“Yes?…” (Thinking – wth? We have a personal banker?)
“Mrs. [PoP]. I was hoping we could meet and talk about what else Wells Fargo can do to fulfill your banking needs. Would you be able to come in for a quick meeting?”
A couple days later, I went in for a quick sit-down with Daniel. Turns out, he’s nice, pretty fresh out of college, and trying to move his way up through the ranks at Wells Fargo. So he’s being entrepreneurial and reaching out to customers to see if he can get them to sign up for new services. I can respect that kind of “go get ‘em” attitude, so I listened to what he had to say.
What Did Our Personal Banker Have To Say?
1. He Wanted Us To Get a Different Checking Account. Wells Fargo is pushing their “PMA” checking account package, and has been for the last year. It’s basically a “relationship” account. What does that entail? Well, there are fees… but if your “total relationship” with Wells Fargo is over a certain amount the fees are waived and there are a couple small benefits (that we wouldn’t really use). The thing is, we are just barely over the minimum “total relationship”, and as we pay the HELOC down (which you can see on our recent balance sheet that we’re doing pretty aggressively), our “total relationship” isn’t going to be big enough to waive the fees. I explained this to Daniel, and he understood where I was coming from, but he had more to offer.
2. He Wanted To Offer Us An Unsecured Credit Line Up To $100K. No, that’s not a typo. You can look at our financials on the net worth page. Would you offer us an unsecured credit line of $100K? Okay, so Wells Fargo doesn’t know that we technically already have a $50K unsecured loan from Mr. PoP’s parents that we’ve got three more years to pay off. But still! That’s just crazy! What is this, 2004 again? Free money for everyone with a pulse!
You want to know the craziest part of the unsecured credit line – the interest rates would be between 9% and 19%. Now, Daniel assured me that based on what we’d talked about our rate would more likely be in the 9-11% range, and if we acted by September 30th, they would be able to knock 1% off the APR as a promotional deal. (I tried to act impressed and grateful for the promotional discount…) But still! $100K loan at even 10% interest? That’s $10K in interest every year.
When I filled Mr. PoP in on my meeting with our “personal banker” later that night, he laughed with me at the absurdity of the $100K unsecured credit line. And when we were done laughing, we imagined… what if?
How Could We Maximize a Default on a $100K Unsecured Credit Line? (click to tweet)
Hey, if some institution is crazy enough to be giving away $100K unsecured, we’ve at least got to think of the possibilities…
- Sell the duplex and the residential lot. The only property we could keep in a bankruptcy would be our primary residence.
- Take out the biggest mortgage possible on our primary residence – maybe even a construction loan and put a major addition on the house, taking care of all those “cookie problems” while we’re at it.
- Use the unsecured credit line, as well as the proceeds of the sale of the duplex and lot to pay down as much on the primary residence as possible. Also use all cash reserves to pay down the mortgage or construction loan there.
- The goal is to have two buckets containing all of our assets with as little liability against those assets as possible – one for the primary residence and one for our retirement accounts (since those are the two major asset classes you get to keep in a personal bankruptcy in the US).
- Let the default begin.
- Declare bankruptcy.
- Theoretically, bankruptcy would wipe out the unsecured credit line, and let us keep the house and retirement accounts. It would kill our credit, but if we’ve got a house with tons of equity (if not completely paid off), what would we care if our credit isn’t so hot?
Obviously we’re not going to do this, and maybe you even think we’re bad people for performing this little mind experiment. But seriously. A $100K unsecured line? I still can’t get over that banks are willing to do that even AFTER the financiapocalypse of 2008.
Have you ever met your “personal banker”? What do you think of the offer for the unsecured credit line? Are we interpreting this completely wrong? What would you do if you were offered a $100K unsecured credit line?