5. Home Equity Borrowing

The dangers of squandering your home equity—a long-term asset—on short-term spending were obvious even before home prices plunged. Yet every time I wrote articles for the MSN Money site warning consumers not to tap their equity to pay for stuff like vacations, big-screen TVs, and credit card debt, the articles were accompanied by big ads from lenders urging consumers to do just that.

Some readers saw the irony and sent me e-mails about the contrast between my sober admonitions and the “Borrow! Borrow! Borrow!” siren song of the ads. But too many missed the advice altogether and succumbed to lender suggestions that they treat their homes like piggy banks.

Doing so dramatically increased the chances they wound up underwater ...

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