Upton Sinclair said, “It’s difficult to get a man to understand something if his salary depends on him not understanding it.”
I really liked this quote. I think I’ve actually run into this phenomenon in a couple of arenas (of my life) recently. It certainly would explain some things.
A little context:
I’m a clean energy nut and was recently reminded of this quote in this post.
As I’ve mentioned before, every once in awhile, this blog produces a slight profit. It’s nothing I can count on. And it’s not very much, so when it does, instead of blowing it, or using it to pay off debt, I’ve begun to tinker with Sharebuilder and invest in some clean energy ETF’s.
So far I’ve been at it about 6 months, and while I’m not losing any money, I’m certainly not making a killing either. Truth be told, as of today, I’m about 5% up. I’ve been up as much as 10%, and I think I’ve been down about as much as 5%.
Let’s be clear. I’m not playing the market. I’m not buying and selling. I’m buying and holding. I’m in long. As the post I linked to alluded to, either I’m insane or the world’s in denial.
I’ve been meaning to post an update about my experience with the Primerica SMART loan for some time now. Many people have come here seeking information about the SMART loan, and since I had had a positive experience with it, I wrote and posted that experience here.
As a blogger, I’ve been riding the Primerica horse, on and off for a while now because it is stimulating such good discussion. A quick search around the web will prove that this isn’t the only blog that gets a traffic boost via the Primerica topic. But people have said (and I pride myself on this) that this blog has been the most even handed. There is a lot to talk about. The mortgage, the insurance, the mutual funds, the career opportunity.
There’s a lot of passion and emotion around this topic too. Money is a big deal for people. But so are career choices. So I think for people who currently are, or have been vested in all things Primerica, it seems easy to get your hackles up.
As I said, I’ve had experience with the SMART loan and wrote about that, but I’ve also been fortunate enough to get a few guest posts, so you’ll also find a few of those here painting Primerica and their products in both a positive and a negative light. The following is a list:
And now, finally, this follow up post on my experience with the SMART loan, almost 5 years since I began with it.
It started (again) last January. Mortgage rates were going down (again), and so I called Rob to see what we could do. At first, he told me a refinance with Primerica would be at a rate of 6.44. Then after I dug around a bit, he remembered something about the equity builder program and the actual rate I’d get would be 6.19.
Well. At that point in time, I knew we were past the prepayment penalty phase (3 years) with Primerica, so I thought it would be wise to shop around a bit. Keep in mind–unlike last time, I didn’t want to consolidate any debt this time. I just wanted a straight up refinance to see if I could save some money on my payments.
As it turns out, this was a good thing. With the mortgage meltdowns and the resulting drop in home prices, our equity in the house was just at the loan to value threshold that a bank would accept. Bottom line, at that time, nobody was about to give me any money if I’d wanted it.
Good thing I didn’t want it. So right away, our situation was different than when we went with the SMART loan those years back.
Anyway, I started doing my research. And without boring you, our local bank (that used to have our loan before Primerica) had 20 yr loans at around 5%.
The problem here is that I didn’t want a 20 year loan. My loan with Primerica only had about 16 years left. I want to pay it off sooner than 20 years. That was one of my main reasons for going with the SMART loan in the first place. And I know that we don’t have the discipline to prepay if we don’t have to–that is, if it isn’t built into the payment structure.
So I looked over a line. The Riverbank (my local bank) was offering a 15 year mortgage at 4.5%. My heart skipped a beat and I started crunching some numbers.
Keep in mind that there are a couple of things I felt very strongly about.
1. Biweekly payments–regardless of the loan, I wanted to continue with biweekly payments, taken right about the same time I got paid every other week. Simple interest, or regular interest, doing this is the fastest way to pay off a loan. We began doing this with the SMART loan. And it’s a very good habit. This is a sort of discipline and expectation thing.
2. I wanted these payments to be taken out of our account automatically. Again, this seems silly, but I don’t want a choice. If I have a choice, I might not do it–again regardless of the loan.
3. Total cost. Money is tight around here. Sure I could make things easier for us by pushing our mortgage out to 30 years again. But I figure, the sooner I can pay off this bugger, the lower the total cost of the loan, the more money I’ll have in the long run . . .right? So we drive beaters and it takes us forever to get new siding and we wear hand-me-downs and shop at garage sales. Still. Life’s good . . .right?
Anyway, that’s where I’m coming from, and that’s the path I hope to continue down. Our biggest challenge will continue to be to NOT take on more debt. When you’re fixed expenses are high. Sometimes that has to happen. It’s a balancing act.
For us, it’s tight. Still, I think I’m making the right choice. I hope I am, anyway–time will tell.
So after I crunched them, here were the numbers. Keep in mind that these results include the biweekly simple interest calculation that SMART loan boasts:
It’s pretty clear that if I could get the 4.5%, this was the way to go.
I could save $87 every two weeks. $174 a month over what we were currently paying. Compared to the Primerica offer, I’d save $31 every two weeks or $62 a month. But the real kicker was the total interest I’d save by going with Riverbank. $25,754!!!
That’s like a new car!! A nice one! Or a good chunk of tuition. Or something.
This was in February though. I wasn’t sure the rates would hold. We still had to go through the application process, get another appraisal, all that.
So I ran the numbers for a 15 year at 5%, just to see. In that case, the biweekly payments would have been $565, and the total interest would have been $52,804.
The bottom line, is that we went with Riverbank, and hopefully this will be the last time we need to refinance this loan. We totally lucked out and got the 4.5% rate. I’m not sure rates will ever drop lower. I’ve been watching and I’ve never seen them lower around here. So like I said, I think we lucked out.
At this point, I think a lot of people will draw the conclusion that a local bank is always going to be better. I don’t think so. I still stand by my decision to go with the SMART loan the first time. Maybe I was wrong. But I don’t think so. We were consolidating a lot of debt at that time. Rates were different at that time.
Regardless, I know for a fact that life got better after the SMART loan. Could it have been even better if we had gone to the Riverbank then? Like I said. I don’t think so. I’ll be honest, maybe it’s my pride speaking, but I honestly don’t think so.
The bottom line for us is that we are better off now with a traditional loan. Much better.
Still . . .I’m not about to bash Primerica. I truly believe they helped us. We still have our life insurance with them. And yes, I’ve crunched those numbers (and will continue to do so) just like I did with the mortgage. I haven’t been able to find cheaper life insurance.
And our Primerica rep came to our house and helped us figure things out.
Still, I never gave up the idea that this is my responsibility. And I never stopped looking for a better deal.
A while ago (a very long while ago) a friend of mine sent me some numbers about Primerica’s SMART loan in a powerpoint format. At the time, I was having some serious problems on this blog, and was unable to follow through publishing this.
I’m not going to rehash it all here, but for a little history, you can visit this post for the back story.
Now, many months later, I can finally follow through on my promise.
Followers of this Primerica saga know that I had a SMART loan myself. I have an update to that little side story that I will post soon. But until then, the following is an article that Ken wrote last October or November to accompany the above slide presentation. And so now, without further ado: The SMART loan, broken down to all its nitty-gritty glory. The devil is indeed in the details. If you’ve been given a SMART loan proposal by a Primerica rep and you’re trying to figure it out. You’re going to want to read this and crunch your own numbers.
A SMART loan guest post
This is a SMART loan solution, one from October that I evaluated:
Pay close attention to a few things on the second page:
Subsequent payments $718.25 * 26 payments =18674.50 divided by 12 = 1556.21 (This is the true monthly outlay on this loan)
Type in that loan amount $212,685.70 and tell the computer you want it paid off in 20 years at let’s say 6% (actually a pretty high rate for the timeframe this SMART loan came out.) What’s the required payment? $1523.75/month
At this point, you should be saying “Oh no, this can’t be true”
Next, look at the total projected timeframe the loan should be paid off on the SMART solution page: 22 years, 4 months.
Wait, The conventional loan will have a monthly savings of $30+/month and be paid off 2 years, 4 months sooner? Can’t be, the SMART loan is the best thing since sliced bread!!!
Let’s take this a step further. You see where it says subsequent payment $718? Look to the left. At closing, the client is required to pay $1436. Really, that should be taken off the balance on the conventional loan we just calculated because we’re borrowing that much less. Also, the loan costs on the 1st page includes more than $5600 in fees (Loan amount minus “debt included in proposal”). This is arguably $3000 more than a broker would charge. So in theory, the loan could be $4400 less if the client simply got a conventional loan.
Let’s type in a loan amount of $208,285 (212,685 – 4400 in extras)
Now the payment drops to $1492. So, the comparative payments from SMART loan vs. conventional loan is $64, again the loan is paid off 28 months sooner.
Let’s take it another step further, shall we? Let’s tell the conventional loan to be done in the same time frame as the SMART loan…22 years. The conventional loan payment is $1422. Oh my goodness, that’s over $100/month less than the SMART loan (and 2 months sooner to be paid off)
See month 120 and notice a balance of $134,409, in a better equity position in 10 years by only $19,000.
In month 180 (15 years), SMART loan balance: $126,000, 20 year conventional $77,185 (Only $50,000 better).
So, there’s never one SINGLE MOMENT the SMART loan puts you in a better position. This is no surprise to full-time financial service professionals. We also know Primerica’s term insurance can cost upwards of 50% more than equally ranked companies that have been in business 3 times as long as Primerica. Not to mention, the insurance product lacks serious features, convertibility to permanent insurance just to name one. Also, the investments through Primerica charge the client nearly 5% before the money even hits the market. Invest $1000, $950 hits the market.
One final laugh…look who the “big bad bank” is that is being paid off in this proposal. Look under “Current Debt Listing” on the 1st page. This must be one of those banks that “wants everyone to be in debt forever”. Primerica, a division of Citigroup is only charging nearly $5,700 for this “gem” of a loan.
Every so often you get the opportunity to make a statement about who you really are–bone deep. Most of the time, very few people are watching. Most of the time, nobody cares.
Often, (and ironically) however, making this statement still takes a measure of courage.
These opportunities are like little nuggets of treasure, because they are opportunities to actually act. To Verb. To do something, as opposed to think, believe, or intellectually value something.
Rarely will this action bring you fame or riches or anything you can see or touch. What it will do, however is ripple invisibly out into the world in huge waves–influencing countless lives along their path through space and time.
Remember this. Have courage. And act on your values and beliefs.