Of all the threats to your financial security, none is more dangerous than debt. If you’re nearing a crisis point and your debt payments are consuming your disposable income, consider a mortgage loan referral through Primerica.
Avoid the Revolving Consumer Debt Trap
If you're only paying the minimum on your credit card debts each month, you may not be making any impact on the balance. The reason?
Most credit card debt is considered "revolving" debt.
Because of the way the interest is calculated in revolving debt, it's difficult to tell how long it's going to take you to pay off the balance. With fixed debt, payments are scheduled for a fixed amount of time (like a car loan). You can easily tell when you will pay off the principal on the debt and — even with the same interest rate and monthly payments — your pay-off date is usually much sooner than with revolving debt.
This chart can help illustrate the difference:
|Which would you rather have?||Revolving Debt1||Fixed Debt|
|Amount borrowed:||$17,000 @ 15% COB||$17,000 @ 15% COB|
|Monthly payment:||Starts at $382.50/month2||Fixed payment of $382.50/month3|
|Years to payoff:||32 years, 4 months||5 years, 6 months|
- This hypothetical example is for illustrative purposes only.
- Assumes revolving payment (minimum) is 2.25% of the remaining balance or $15, whichever is greater. First month's payment is shown and term assumes continued payment of minimum amount. No additional debt incurred and payments decrease over time period.
- Assumes payment of 2.25% of initial loan amount, no additional debt incurred and initial payment amount remains fixed throughout term of loan. Each debt situation will vary. The amounts borrowed, amounts of interest paid and total costs illustrated above were rounded to the nearest $100.
What is a debt consolidation loan?
With a debt consolidation loan, the lender pays off your creditors and combines all the balance amounts into one loan with one fixed payment. Once you’ve consolidated, you’ll usually begin to make lower monthly payments. You can then apply the extra money you’ve made available toward your debt freedom and retirement saving.
The Debt Solution 1
$156,801 at $1,1572 a month
(for 15 more years)
$50,000 @ $1,4103 a month
$2,567 in Total Monthly Payments
Refinanced $210,601 for 25 years at $1,051 per month4 at age 33
Makes available $1,516 a month
Add $758 a month toward payment of additional principal.
Invest $758 a month at 9% for
12 years = $196,8105
$196,810 invested/home and all debt paid off in 12 years
Take the $196,810 lump sum and invest with the $2,567
now available each month until age 65
The total, given a 9% return over 20 years = $2.91 million5
1 The above example is for illustrative purposes only. 2 The above monthly payment does not include taxes and insurance, COB of 4%. 3 Based on the assumption that the present payment program continues on two open-end credit card accounts with balances of $5,000 and $25,000 respectively, with cost of borrowing (COB) of 19% and 29% respectively, with monthly payments of $180 and $750 respectively and one fixed personal loan with a balance of $20,000, monthly payment of $480, COB of 7% and original term of 48 months. 4 The above monthly payment does not include taxes and insurance. The refinancing amount of $210,601 includes estimated refinancing costs and any associated penalty. This example assumes a COB of 3.5%. Assumes no additional debt is incurred. 5 The accumulation figure reflects continued contribution of the same dollar amount (made at the beginning of each month) over the number of years indicated above at 9% constant nominal rate of return compounded monthly, unlike actual investments which will fluctuate in value, and does not take into consideration taxes or other factors, which would lower results. This is hypothetical and does not represent an actual investment. Investing entails risks, including loss of principal. Units, when redeemed, may be worth more or less than their original value.
Mortgage Loans Primerica Representatives make simple referrals of clients to approved third party mortgage loan providers under Primerica's mortgage loan referral programs. The simple referrals made by the Representatives take place pursuant to agreements between Primerica Life Insurance Company of Canada, PFSL Investments Canada Ltd., and approved third party mortgage loan providers. Clients should contact the approved third party mortgage loan providers for questions regarding mortgage products. Primerica does not deal in mortgages. Representatives are prohibited from holding themselves out as mortgage brokers, or soliciting and giving advice on mortgages for the purposes of Primerica's mortgage loan referral programs. Please consult your local Primerica office or your Primerica Representative for further details regarding Primerica's mortgage loan referral programs.
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