Wishful Thinking; Americans Dreaming of a Debt-Free Future But Doing Little to Plan for It

Wishful Thinking; Americans Dreaming of a Debt-Free Future But Doing Little to Plan for It

New Survey by LendingTree.com Finds Those Most Concerned With Debt Actually Planning to Incur More in 2005

CHARLOTTE, N.C., Jan. 10 /PRNewswire-FirstCall/ -- Americans on the whole dream of a debt free future but few are doing anything to plan for that scenario, according to a new survey released today by LendingTree.com. Moreover, the vast majority of people who are most concerned about their debt have no intention or definitive strategy to manage it, but instead are planning to make big-ticket purchases that will make their financial situation worse.

(Photo: http://www.newscom.com/cgi-bin/prnh/20050110/CLM039 )

Occurring at a time of year when people traditionally take stock of their finances, The LendingTree.com Smart Borrower Survey finds that many Americans long to become smarter borrowers but have quite a ways to go. LendingTree.com hopes the survey, which polled 1000 consumers, will highlight the importance of approaching debt wisely through smarter borrowing techniques and decisions as we enter 2005.

"When it comes to breaking the cycle of debt, most Americans have good intentions. What they lack are the tools, support and knowledge to manage their debt wisely. They dream of a debt-free future, but need to learn how to become smart borrowers to make that dream a reality," said Ed Powell, chief consumer officer at LendingTree.com. "The good news is that it's never too late to become a smart borrower, and there are sensible measures and methods that can help people get off the treadmill of habitual debt. The New Year is the prefect time to rekindle that resolve and become fiscally fit."

The Debtors' Dream: The vast majority of respondents, almost 80%, believe that their future holds a life completely free from debt. Few, however, plan to incorporate a stricter regimen of smart borrowing practices and decision making to convert this dream into a reality. The survey illustrates an overall disparity between best intentions and actual deed. Ruled by inertia, apathy or worse, denial, consumers indicate in their responses that they are either not doing enough to improve their debt standing or are making matters worse with unnecessary purchases that will ultimately aggravate the situation.

What, Me Worry?:

The survey finds that of those making any kind of New Year's resolution, most center on health matters. Those who make a financial resolution do so with somewhat feeble conviction:

* A full 80% of the respondents who make financial resolutions do not
plan to seek professional help to manage their debt and/or finances;
* 13% have no intention of developing a financial plan of any kind;
* 30% indicate they will develop a plan on their own without any
professional assistance;
* 30% of those who lack a financial plan are more concerned with the
amount of their monthly payments than the overall terms of a loan. Few
understand that the smarter borrowing option is to consider the overall
terms and not just the monthly payment.



The survey also finds that a significant number of respondents, 60%, are moderately to extremely concerned about their overall level of debt. However:

* Of this number of concerned consumers, 63% do not have a financial
plan;
* In addition, only one in ten of those who are concerned with their debt
plan to seek out a professional financial planner to assist with debt
management.



A portion of those who are moderately to extremely concerned with their overall debt indicate plans to make their situation worse by making unnecessary purchases, prolonging the vicious cycle of debt:

* 19% of those concerned with their debt have plans to purchase a car in
2005;
* 21% of those concerned with their overall debt have plans to make home
improvements over $3000.00, but more than one third of these people
don't know how they will pay for the home improvements they are
planning;
* 33% of those most concerned with their debt have a debt-to-income ratio
of 50% or more, which is 10% higher than the national average. Worse,
almost one in four consumers surveyed have a debt-to-income ratio of
50% or more. The ideal debt to income ratio, according to most
financial planners and lending institutions, is 33%.
* Of the 76% of those with outstanding balances on credit cards/personal
loans who are concerned about their overall level of debt, 37% are only
making minimum payments and playing "credit card bingo" by rolling over
balances to lower interest cards.
* 26% of those who claim to be knowledgeable about loans and finances
are approaching credit card debt in the same manner.



Defining Debt; Assessing the Damage: People's overall lack of knowledge surrounding debt and smart borrowing should be juxtaposed with some realities and facts on the ground:

* The typical U.S. household carries $9,200 in credit card debt,
according to CardWeb.com, shelling out $1,100 each year in interest and
fees;
* According to the Deborah McNaughton, president of The Professional
Credit Counselors, Americans between 35-to-44 have the highest rate of
bankruptcy followed by those 25-to-34. Bankruptcy stays on a credit
report for 10 years;
* According to the US Federal Reserve, debt levels of U.S. households
increased at a 9.1% annual rate in the third quarter 2004 to
$9.95 trillion;
* Also according to the Federal Reserve, total U.S. debt increased at a
7.4% annual rate to $23.6 trillion.



The Art of Smart Borrowing: The survey reflects borrowers' basic lack of overall knowledge on how to approach smart borrowing.

* 40% of the respondents think they are either very or extremely
knowledgeable when it comes to lending options and debt while 60% think
they are either not knowledgeable or insufficiently knowledgeable.

However:
* Of those respondents who indicate they will work to consolidate their
debt in 2005, 38% are not sure how they would go about it;
* 37% of the overall respondent population believes that the Federal
Reserve and its chairman have the most significant impact on home
mortgages. This demonstrates only a cursory understanding by consumers,
since mortgage rates are indirectly affected by the Federal Reserve,
and are primarily affected by the direction of U.S. Treasury bonds.
* 47% of the respondents think a home equity loan is a financially
responsible form of debt, 27% do not;
* One in three think a mortgage refinance with cash out option is the
most financially responsible.

Survey Methodology


LendingTree.com, via Insight Express, polled more than 1000 respondents during December, 2004. The survey had an overall margin of error of +/- 3%. The survey criteria is based on an age population of 21+ with sampling balancing for household demographics. Additional results of the survey can be found in the press room at http://www.lendingtree.com/ .

About LendingTree, Inc.

LendingTree, Inc.(R) is the leading online lending exchange connecting consumers with lenders who compete for their business. Since inception, LendingTree has served more than 14 million consumers, facilitating nearly $95 billion in closed loan transactions. LendingTree.com offers consumers access to mortgages and refinance loans, home equity loans, auto loans, personal loans, and credit cards via its Web site http://www.lendingtree.com/ .

Founded in 1998 and headquartered in Charlotte, N.C., LendingTree, Inc. is part of IAC Financial Services and Real Estate, an operating unit of IAC/InterActiveCorp (NASDAQ:IACI), which also owns LendingTree Loans, LendingTree Settlement Services, GetSmart(R), RealEstate.com, Domania, iNest, and the real estate business of ServiceMagic.

Media Contacts: Gil Isenstein Mullen PR 978-468-1155 Gil.Isenstein@Mullen.com

Jason Jepson LendingTree.com 949-885-3523 Jason.jepson@homeloancenter.com

Available Topic Expert(s): For information on the listed expert(s), click appropriate link. Ed Powell http://www.profnet.com/ud_public.jsp?userid=346821

Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20050110/CLM039
AP Archive: http://photoarchive.ap.org/
PRN Photo Desk, photodesk@prnewswire.com
Source: LendingTree, Inc.

CONTACT: Gil Isenstein of Mullen PR, +1-978-468-1155, or
Gil.Isenstein@Mullen.com ; or Jason Jepson of LendingTree.com,
+1-949-885-3523, or Jason.jepson@homeloancenter.com

Web site: http://www.lendingtree.com/


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