Bankers Math — Bank Like a Bank Instead of Like a Consumer

Is 4% really 4%? Not accord­ing to bankers math.

Sce­nario One.

Pur­chase a car for $15,000 4% inter­est rate Monthly pay­ment $338.69 Term is 48 months or 4 years.

Check for your­self  at Bankrate.com

Let’s look at the amor­ti­za­tion sched­ule of this loan.

Amor­ti­za­tion table for $15,000.00 bor­rowed on Oct 03, 2010

Month / Year Pay­ment Prin­ci­pal Paid Inter­est Paid Total Inter­est Bal­ance
Nov. 2010 $338.69 $288.69 $50.00 $50.00 $14,711.31
Dec. 2010 $338.69 $289.65 $49.04 $99.04 $14,421.67
Jan. 2011 $338.69 $290.61 $48.07 $147.11 $14,131.05
Feb. 2011 $338.69 $291.58 $47.10 $194.21 $13,839.47
Mar. 2011 $338.69 $292.55 $46.13 $240.35 $13,546.92
April 2011 $338.69 $293.53 $45.16 $285.50 $13,253.39
May 2011 $338.69 $294.51 $44.18 $329.68 $12,958.88
June 2011 $338.69 $295.49 $43.20 $372.88 $12,663.39
July 2011 $338.69 $296.47 $42.21 $415.09 $12,366.91
Aug. 2011 $338.69 $297.46 $41.22 $456.31 $12,069.45
Sept. 2011 $338.69 $298.45 $40.23 $496.54 $11,771.00
Oct. 2011 $338.69 $299.45 $39.24 $535.78 $11,471.55
Nov. 2011 $338.69 $300.45 $38.24 $574.02 $11,171.10
Dec. 2011 $338.69 $301.45 $37.24 $611.25 $10,869.65
Jan. 2012 $338.69 $302.45 $36.23 $647.49 $10,567.20
Feb. 2012 $338.69 $303.46 $35.22 $682.71 $10,263.74
Mar. 2012 $338.69 $304.47 $34.21 $716.92 $9,959.26
April 2012 $338.69 $305.49 $33.20 $750.12 $9,653.78
May 2012 $338.69 $306.51 $32.18 $782.30 $9,347.27
June 2012 $338.69 $307.53 $31.16 $813.46 $9,039.74
July 2012 $338.69 $308.55 $30.13 $843.59 $8,731.19
Aug. 2012 $338.69 $309.58 $29.10 $872.69 $8,421.60
Sept. 2012 $338.69 $310.61 $28.07 $900.77 $8,110.99
Oct. 2012 $338.69 $311.65 $27.04 $927.80 $7,799.34
Nov. 2012 $338.69 $312.69 $26.00 $953.80 $7,486.65
Dec. 2012 $338.69 $313.73 $24.96 $978.75 $7,172.92
Jan. 2013 $338.69 $314.78 $23.91 $1,002.66 $6,858.15
Feb. 2013 $338.69 $315.83 $22.86 $1,025.53 $6,542.32
Mar. 2013 $338.69 $316.88 $21.81 $1,047.33 $6,225.44
April 2013 $338.69 $317.93 $20.75 $1,068.08 $5,907.51
May 2013 $338.69 $318.99 $19.69 $1,087.78 $5,588.52
June 2013 $338.69 $320.06 $18.63 $1,106.40 $5,268.46
July 2013 $338.69 $321.12 $17.56 $1,123.97 $4,947.33
Aug. 2013 $338.69 $322.19 $16.49 $1,140.46 $4,625.14
Sept. 2013 $338.69 $323.27 $15.42 $1,155.87 $4,301.87
Oct. 2013 $338.69 $324.35 $14.34 $1,170.21 $3,977.52
Nov. 2013 $338.69 $325.43 $13.26 $1,183.47 $3,652.10
Dec. 2013 $338.69 $326.51 $12.17 $1,195.65 $3,325.58
Jan. 2014 $338.69 $327.60 $11.09 $1,206.73 $2,997.98
Feb. 2014 $338.69 $328.69 $9.99 $1,216.72 $2,669.29
Mar. 2014 $338.69 $329.79 $8.90 $1,225.62 $2,339.50
April 2014 $338.69 $330.89 $7.80 $1,233.42 $2,008.62
May 2014 $338.69 $331.99 $6.70 $1,240.12 $1,676.63
June 2014 $338.69 $333.10 $5.59 $1,245.70 $1,343.53
July 2014 $338.69 $334.21 $4.48 $1,250.18 $1,009.32
Aug. 2014 $338.69 $335.32 $3.36 $1,253.55 $674.00
Sept. 2014 $338.69 $336.44 $2.25 $1,255.79 $337.56
Oct. 2014 $338.69 $337.56 $1.13 $1,256.92 $0.00

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If we look at month one’s pay­ment we see that the front loaded inter­est charge is $50 / $338.69 = 14.76%

If we look at say the 36 month period, we have $1170.21 divided by the $15,000, minus what is left to pay which in this case is 11,022.48, and we have 10.6%

Now let us look at how much inter­est we paid over the 48 months. Isn’t it $1,256.92?

Now if you divide $1,256.92 by the $15,000 you get 8.3% over the 48 month period. But how many peo­ple do you know that buy another car before the first one has fin­ished being paid off? There is no 4% inter­est rate any where to be found.

This is how banks make their money. They are more con­cerned with volu­miz­ing their money than any­thing else.  It is the vol­ume of inter­est they are being paid that is what they like to see.

Now on top of that, they also veloc­i­t­ize the money received from our pay­ments. What does that mean? That means, as soon as they receive your pay­ment they lend it out to the next Joe Blow from Cocoamo.

So while they are earn­ing $14.76% on your first months car pay­ment, as soon as they receive that they lend it to the next car pur­chaser who they also earn 14.75% on in your month two. And so it goes on and on and on every day over and over again.

Where can you invest, with no risk and earn a guar­an­teed 8.3% or a 10.6% or even 14.76% which you can also recap­ture and veloc­i­t­ize so you earn even more than that over time?

Now I ask you, why on earth wouldn’t you want to do the same thing as the banks do with your money, but in your own pri­vate bank­ing sys­tem? I mean, come on now. Call me right now so I can show more about how banks work and how you can begin to bank like a bank instead of like a consumer.

Or if you are not yet con­vinced… Wait till you check out the amor­ti­za­tion sched­ule of a mort­gage. Now you are look­ing at per­cent­ages in the 80’s and above. Wouldn’t you like to recap­ture, reuse and recy­cle your money the way the banks already are. You might be say­ing ‘but I pay with cash. I never finance any­thing’. Really?

Well even so; point #1. The banks are also recap­tur­ing prin­ci­pal not just the inter­est. Wouldn’t you like to recap­ture your prin­ci­pal cash?

point #2. If you hadn’t spent that cash, how much could you have been earn­ing in inter­est pay­ments? 2%? 3%? 4%? and for how long could you have been earn­ing that inter­est if you hadn’t spent that money?

point #3. Where did the cash come from? Did you save it up over a period of time? Weren’t you then mak­ing pay­ments to your­self before you paid for the car?

point #4.  Now that you have spent the cash, how are you going to pay for the next car? Aren’t you going to have to con­tinue mak­ing pay­ments to some place till you have enough to pay for the next one?

point #5. Money has to reside some­where. Wouldn’t you like your money to reside in a finan­cial vehi­cle that offers over 30 ben­e­fits? One ben­e­fit is that it can behave like your own bank­ing sys­tem. For instance, banks don’t lend their own money, they lend their depos­i­tors money to the borrowers.

Wouldn’t you like the oppor­tu­nity to bor­row from a gen­eral pool of money that has your cash value as col­lat­eral where your money is able to con­tinue to grow, safely, securely and guar­an­teed while at the same time you are bor­row­ing from elsewhere.

How­ever, you are the depos­i­tor, you are the bor­rower and you are a part owner of the finan­cial insti­tu­tion that lends from the pool. So you earn inter­est on your sav­ings, you recap­ture the prin­ci­pal you are bor­row­ing, you earn the inter­est you pay your­self for bor­row­ing the money, you earn the div­i­dends of your company’s prof­its and it all hap­pens in a tax advan­taged way.

Please tell me where you can do bet­ter than that? I’ll bet you $100.00 in your name to your favorite char­ity  that after read­ing Becom­ing Your Own Banker by best sell­ing author Nel­son Nash and hav­ing at least one webi­nar meet­ing with me, you cannot.

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October 4, 2010 · Jennifer · No Comments
Tags: , , , ,  · Posted in: Bank Like A Bank, Bank strategies for Fastest Debt Elimination, BANKING with INSURANCE, DEBT ELIMINATION, RATE of RETURN

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