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How To Steal From Yourself – A Line of Credit Case Study
In this episode of the Cash Flow Guys Podcast, I talk about the latest trends in money and more specifically lending. Borrowing of money seems to become easier by the minute, banks and other financial institutions are literally giving money away to virtually anyone willing to fill out an application and pay some startup costs.
Below is a breakdown of an actual loan offering that was sent to one of the students of the MailBox Money Mastermind. Fortunately, he was trained to recognize why this was such a terrible opportunity and did not pull the trigger on this. Throughout the Mailbox Money program students learn how to make raising money simple, thus “expensive money” loans are simply not worth bothering with.
Actual loan offering:
$680,000 Loan Amount “Pre-approved”
10% Interest
2% Origination Fee ($13,600)
1% Consulting Fee ($6,800)
1% Broker Fee ($6,800)
1% Credit Line Setup Fee ($6,800)
Total Loan Fees: $34,000
Cancellation Fee $5,000
(Triggered by a “Lack of Follow Through” by not submitting the requested paperwork in a timely manner or the submitted paperwork not being “approved” by the lender)
60 month term, payments of $15,170.39 Total = $910,223.40
What I find interesting about this breakdown is that the actual loan payment amount does not add up. I ran this several times to make sure I wasn’t crazy only to realize there must be additional undisclosed fees built in I am not allowing for.
Regardless, far too many investors get sucked into these “easy” loan programs, often winding up being saddled with fees and other charges which basically enable them to fail.
In every case, the funding must fit the deal which means how you fund each and every deal matters most. HOW you fund the deal is more important than how you negotiate the purchase itself. Jimmy Napier said that the fastest way to ruin a great deal is to put bad financing on it. Based on this always be sure the deal you are considering can afford the financing you are about to use to buy it.