I am often astonished at the real estate “Guru” who charge outrageous (unpublished) interest rates for their products. As if their astronomical pricing isn’t bad enough, they offer time payment plans that are nothing short of usurious, making high credit card interest rates seem reasonable in comparison.
I recently sat through a yet another long-winded video pitch for an over priced product. At the end of the pitch (interspersed with assertions of the “good life” with easy riches), the price tag came in at $497 for a single payment, or three monthly payments of $175. You can choose to pay on your credit card $497 now, or three payments of $175 totaling $525. That seems reasonable, right? A $28 finance charge for the convenience of spreading out your payments doesn’t seem so bad, when you consider it’s a $497 product. Yeah, right!
First, why would you need to spread out the payments when buying on a credit card? Most credit cards allow paying off a purchase over time. Is your credit card maxed out? Then why are you buying yet another guru product when you can’t even manage your own personal finances?
Next, what is the effective annual interest rate on that time payment purchase? Three payments of $175 with the first payment now, leaves $322=$497-$175 to pay over the next 2 months. Get out your financial calculator, plug in 2 payments, Present Value $322, periodic payment -$175, Future Value zero, and solve for the interest rate. That comes to 68.92% annual interest rate! You would be better off just paying the full price and paying off your credit card at a 20% annual interest rate (less than one-third of the guru interest rate).
The guru is preying on financially illiterate folks who are desperate for a solution to their money problems. (Hint: They have money problems precisely because they are financially illiterate!) This is one of the ways that I filter out the greedy online marketers. Is their price reasonable considering the amount of real content versus puffery? Are they truly committed to their customer’s success? Or are they just trying to squeeze out every last penny from anyone desperate, foolish or naïve enough to fall for their latest pitch of easy riches?
If you are truly focused on getting out of personal debt, then take a look at my Excel 2007 spreadsheet Power Debt Plan by clicking here.
What if you are so broke that you can’t afford Microsoft Excel 2007? Just buy a $7 thumb drive (also called a “Flash Drive”) at Best Buy or Staples to hold your computer files, go to a public library and plug into one of their computers that already has Microsoft Office 2007 or later. Buy my product, download it and save it on your thumb drive. Then run the numbers on the public computer. I show you how to do it with several mp4 video tutorials. You can download a free mp4 video player for your Windows or MAC computer from QuickTime.com.
Financial literacy is the key to financial freedom. Take the first step by understanding what your personal debt is really costing you, then make a plan to get out of your personal debt by clicking here.