Debt Freedom. Primerica Canada Debt Freedom System

Transcription

1 Debt Freedom Primerica Canada Debt Freedom System To receive a SMART Loan referral fee, the new associate must introduce the client to the certified field trainer to make the referral. New associates must NOT make SMART Loan referrals to prospective clients. COMPLIANCE - SMART Loan Referral Requirements MUST complete the SMART Certification Training MUST have SMART Loan Referral Program Enrollment Application and Attestation form completed and on file at Home Office MUST comply with Primerica Canada Referral Programs Policy MUST be Life or Mutual Fund licensed NOTE: Unlicensed associates must be accompanied by a field trainer who meets the above requirements and makes the referral. Key Points of the SMART Loan Referral Agreement I acknowledge that I am not registered as a mortgage broker and am prohibited by law from soliciting and giving advice on mortgages. I will not in any way represent to the public that I am in the business of lending money on the security of real estate, such as through AGF Trust Company, Primerica or any of their affiliates; I will not in any way advertise the Program whatsoever, including but not limited to the use of sign(s) or notice(s), nor shall I advertise that I am a mortgage broker or an individual who buys, sells, places, or refinances mortgages; I will not in any way make any promise as to a prospective borrower s eligibility for a mortgage loan, guarantee an interest rate or amount of any loan, or offer a SMART LOAN or any other loan, as a direct means to acquire other products available from AGF Trust Company or Primerica Client Services, or life insurance products offered by Primerica Life Insurance Company of Canada ( PLICC ) or mutual funds through PFSL Investments Canada Ltd. ( PFSL ); I will restrict my activities respecting SMART LOANs to presenting AGF Trust Company or Primerica approved materials. I will not involve another mortgage broker or non-primerica company in the SMART Loan referral business. I understand that SMART Loans are part of the clients debt reduction strategy and are used for debt consolidation purposes only. I will not insert any interest rate or other loan values or terms into the FNA illustration prior to the client acceptance of the proposed AGF Trust Company debt consolidation loan. The Problem: Are You Debt Free? The Canadian household debt-to-income ratio has risen to a record 145 per cent. In other words, for every $100 in income, Canadians carry $145 in debt. - Money.ca.msn.com, January 4, 2010 Outstanding credit card balances of Canadian banks totaled $52 billion, more than five times greater than a decade ago. - Metro Newspaper, April 16, 2009

2 ...the current individual bankruptcy rate of 4.3 per 1,000 people - already four times as high as the one per 1,000 level in the 1980s - will grow to a peak rate of almost six debt filings per 1,000 people this year and into May 1, 2009 Over the last two decades, Canadian household debt levels have gone up, savings levels have plummeted and perspectives have changed from Can I afford it? to Can I afford the payments? - Money.ca.msn.com, January 7, % of Canadians feel that debt limits their ability to reach financial goals in at least one of the critical areas of retirement, education, leisure and travel, or financial security in unexpected circumstances. - viewed January 20, 2010 Doesn t it make sense for your client to control the debt in their life? The Answer: Become Debt Free! The Primerica Debt Solution System Leads To SMART Loan Consolidation Combine outstanding debts (mortgages, installment & revolving)using available collateral to reduce monthly payments and time in debt Potential lower monthly debt payments Potential interest cost savings AND/OR Debt Acceleration Reposition current debts on a pay-off-first basis Accelerate debt pay-off Include mortgage debt DEBT FREEDOM DAY Let The Numbers Tell The Story: 1st Mortgage of $1,100/month (for 14 more years) Personal Debt = $900/month Total monthly payments = $2,000/month Total Debt at age 33 refinanced $126,250 for 20 years at $1,162/month Makes Available $838/month Invest $200 a month at 10% for 8.5 years = $32,220 Add $638/month toward payment of additional principal $32, 200 invested/house and all debt paid off in 8.5 years Take the $32,220 lump sum and invest with the $2,000 now available each month until age 65 The total, given a 10% return = $2,605,000 PROBLEM: DOES THIS LOOK LIKE YOUR FINANCIAL PICTURE? Monthly Bills: BALANCE: PAYMENTS: Bank Credit Cards $3,838 $192 Department Store $2,503 $132 Credit Cards $3,092 $155 Gasoline Credit Cards $269 $25 Car Loans $1,899 $250

3 Installment Loans $5,152 $338 Totals $14,250 $960 SOLUTION: CONSOLIDATE DEBT WITH A SMART 2ND MORTGAGE Home Equity Loan** $15,000 Total bills paid off $14,250 Closing Costs*** $750 Old monthly payments $960 New monthly payment $228 Initial Savings $732 The Benefits of Debt Consolidation One Monthly Payment Lower Monthly Payment Less Interest Paid Re-allocation Of Debt Dollars Specific Debt Freedom Date Less Time In Debt Good Debt vs. Bad Debt Good Debt Appreciating Asset Monthly Payment Fixed Period Bad Debt Depreciating Asset Minimum Payment Revolving Period Fixed Debt Vs. Revolving Debt Clients should consider the following example, which assumes a $10,000 starting balance with no new debt added and minimum payments made: 14% Revolving Debt* 18% Fixed Debt** Years to pay off 18 years, 11 months 3 years, 11 months Total interest paid $6,245 $3,965 *Minimum payment is 3% of the remaining balance or $10, whichever is greater. Payment will decrease over time. **Monthly payment used is 3% of the INITIAL outstanding balance. On revolving debt, by paying the minimum monthly payment typically 3% or less of the outstanding balance, the client is barely touching the principal balance owed. On a fixed debt, which is amortized over a definite term, the monthly payment remains unchanged over the term of the loan, thus increasing the amount applied to the principal each month. The fixed loan is paid off faster, and The client pays less interest. The key difference between a fixed debt and a revolving debt is the minimum payment.

4 The client should always consider how much is going towards principle and how much is going towards interest. Debt Acceleration Compounding works to your advantage Payments directly on principal Reduce overall interest payments Reduce overall time in debt Consolidate, Accelerate, Eliminate! 1st Mortgage of $1,100/month (for 14 more years) Personal Debt = $900/month Total monthly payments = $2,000/month Total Debt at age 33 refinanced $126,250 for 20 years at $1,162/month Makes Available $838/month Invest $200 a month at 10% for 8.5 years = $32,220 Add $638/month toward payment of additional principal $32, 200 invested/house and all debt paid off in 8.5 years Take the $32,220 lump sum and invest with the $2,000 now available each month until age 65 The total, given a 10% return = $2,605,000 SMART LOAN Referral Process At the Kitchen Table Establish debt control is essential for financial independence. Gather FNA Data Discuss the financial principles of debt Based on your client s debt situation and our debt consolidation referral program, have the client complete the SMART Loan Referral Card and fax to AGF Trust Company SMART Do s You must comply with your Primerica Canada Referral Programs Policy Talk about debt consolidation and acceleration as the solution and the Primerica Debt Freedom System as a way to accelerate the process. Talk about other financial solutions. Talk about debt solutions with a client whom you think has a debt challenge. Refer to the brochure outlining the Rule of 50/30 and the concept of mortgage acceleration. Get referrals and recruits. SMART Don ts Don t tell a client We won t have any problems with this one! Don t tell a client anything about loan interest rates. Don t discuss property values. Don t make the client s decision for them. Don t engage in any activity prohibited in your Primerica Canada Referral Programs Policy Don t engage in any activity which would require you to be licensed as a mortgage broker in any province or territory.

5 Be Sure To Answer This Question? What if the SMART Loan is NOT approved? What Is Plan B? Continue Debt Principles Discussions Offer FNA Debt Stacking / Elimination Program Client Obtain Credit Bureau / Score for Their Details (A Credit bureau is like a financial resume; a historical record of past experience and performance. It also serves as an indicator of what a prospective lender can expect in the future) Maintain Client Relationship Revisit In The Future Debt Revolution Primerica Canada Debt Freedom System