Pay Cash or Take a Loan?

In my  last blog I explained the Velocity of Money and showed the power of reusing money to create wealth.

In this message I will demonstrate that using Other People’s Money (OPM) beats paying cash.

First, let’s set the stage. I have $20,000 in an account earning an interest rate of 3%. I need to purchase a car and I have found one that fits my needs and the cost is $20,000. I can qualify for a loan to pay for the car at an interest rate of 5% over five (5) years. What do I do? Radio talk show hosts would tell me to pay the cash but let’s see the real numbers.

The $20,000 compounding for five years at 3% would grow to $23,185. The $20,000 loan, plus the interest at 5% over the same five years would cost $22,551 ($375 X 60 months). Wait a minute. You have $633 more in savings than the loan cost!

But now see the power of Privatized Banking! Your $20,000 stays at interest. You use it as collateral, take the loan against your account then pay the payments back and keep the interest. You are a Wealth Builder.

Remember previous lessons. You will use this same money over and over again in your business and/or personal life.

In my next message I will explain to you some the mentality of Control.