Negative Net Worth
To say a person has negative equity is the same as to say they have "negative net worth" (where their liabilities exceed assets). One might come to have negative equity as a result of taking out a substantial, unsecured loan. For example, one might use a student loan to pursue higher education. Although education may increase the likelihood of higher future earnings, that potential is not a financial asset.
In the United States, student loans are non-dischargeable in bankruptcy, and typically lenders provide student loans without requiring security. This stands in contrast to lenders requiring borrowers to have an equity stake in a comparably-sized real estate loan, as described above, secured by both a down payment and a mortgage. An explanation for the willingness of creditors to provide unsecured student loans is that, in a practical sense, American student loans are secured by the borrower's future earnings. This is so since creditors may legally garnish wages when a borrower defaults.
Read more about this topic: Negative Equity
Famous quotes containing the words negative, net and/or worth:
“There is no reason why parents who work hard at a job to support a family, who nurture children during the hours at home, and who have searched for and selected the best [daycare] arrangement possible for their children need to feel anxious and guilty. It almost seems as if our culture wants parents to experience these negative feelings.”
—Gwen Morgan (20th century)
“it was you untying the snarls and knots,
the webs, all bloody and gluey;
you with your twelve tongues and twelve wings
beating, wresting, beating, beating
your way out of childhood,
that airless net that fastened you down.”
—Anne Sexton (1928–1974)
“The sailor is frankness, the landsman is finesse. Life is not a game with the sailor, demanding the long head—no intricate game of chess where few moves are made in straight-forwardness and ends are attained by indirection, an oblique, tedious, barren game hardly worth that poor candle burnt out in playing it.”
—Herman Melville (1819–1891)