Why do Primerica people say interest rates don't matter?

Question

Over a year ago, I had someone from Primerica try to convince me to turn my 5.75% 30 year mortgage into an 8% "22" year mortgage ..which would be paid 'biweekly'.

His rational was that 'interest rates don't matter' and I would be saving because I could pay the mortgage off earlier.

When I showed him that I would be paying several thousand more in interest in the first few years to Primerica as opposed to keeping my current mortgage and adding an extra payment at the beginning of the year (26 biweekly payments =13 monthly payments a year)...he still insisted Primerica was better.

I mean, people say it isn't a scam because its a legitimate business..well..check advance businesses are legitimate and lawful businesses too..and rip you off.

So..why do Primerica people completely disregard monetary policy (the importance of interest rates on the economy) and try to sell people high interest rate mortgages?

Answer 1

Interest rates do matter. Primerica reps are wrong. They are just not counting on you being someone who understands numbers. There is no way an 8% mortgage is better than a 5.75% mortgage. The "magic" of bi-weekly payments is the extra payment you are making, not the fact that you are making payments every two weeks.

Also, I believe that their mortgages have a huge pre-payment penalty. So, even if someone figures out that the Primerica mortgage is a bad deal, refinancing out of it will be very expensive.

There are a lot of things in this world that are legal but are bad for you. Primerica is one of them.

Answer 2

Ann you are tad smarter than the average bear. Keep running the numbers when anything sounds or smells fishy. The bottom line is Caviat Emptor, let the buyer beware. In one respect I hate it in another I wouldn't have it any other way. Interest is rent you pay on money. No one would look at an apartment that was on the market for $500 a month and say that's too low, I insist on paying $650. They should adopt the same attitude about borrowing money.

The old adage, "A fool and his money are soon parted" also applies. I really don't want the government trying to protect fools. It is sad but when ever the government gets involved in micromanaging a free market economy it invariably makes things worse.

You did well, very well and I salute you. I wish all consumers were as bright. Maybe they would be screaming at the government to stay out of the economy rather than trying to regulate it to death.

Answer 3

Interest rates do matter as you point out. If, for example, one were to add $100 to each monthly principal payment that would cut years off the mortgage. Primerica folk are being misleading, at best, by stating what they did.

Good job in not believing them.

Answer 4

Most Primerica people are trained only to sell products! They are sales people who are motivated to sell products that they have little or no knowledge of.

They get people pumped up about paying off a house earlier, so suckers buy into it.

Primerica loves to hire new people because they understand that most of them will be able to sell the stuff to their parents and brothers and sisters (because the family wants to help them out). Six months later, the salesman figures out they cannot sell to folks outside of their family and exit the business. BUT Primerica retains the family's business.

Sheer genius!

Answer 5

The Primerica agent is somewhat right that interest rate does not matter. Its the rate at which you pay that does matter. What does interest rate really do for you? It just sets the payment.

When you refinance, three things that matter the most to least are:
1) How much do you save off the total cost?
2) How soon can you pay this off?
3) And finally, what is your interest rate?

You have to check what is the total interest you are paying on your current mortgage now and check the total interest you are paying on Primerica's loan. If Primerica can save you tens of thousands of interest on the loan, then interest rate does not matter. Its the rate at which you pay.

You have to check how many years you have left to pay on your current loan vs how many years you have left to pay on Primerica's loan. If Primerica can get you out of debt few years sooner, then interest rate doesn't matter. Its the rate at which you pay.

And finally, interest rate is the least important factor.

What it all comes down is you have to compare the two loans and find out which one outweighs the other. I don't think there's any other company that is going to show you how to pay off the loan faster versus keeping you in debt for another 30 years.

Answer 6

The reason is that they are not looking out for the customer. They are looking out for their own pocketbooks!!

If you kept the same mortgage you have now and just paid one extra payment a month, you would be SO much better off.

I really can't stand companies that don't train their employess how to do math.

I'm with you on this!

http://www.financialgym.org

Answer 7

One of the worst companies in the history of planet earth!
Way to go in telling that nimrod where to go! The other people who answered were right. No interest in the customer's interests. Another MLM scam! At least you didn't listen. Too many people do unfortunately.

Answer 8

Motive. They have a product to sell. They have to get you to forget about the interest rate to sell it.

If you used a spreadsheet program and figured it out yourself - good for you. You did your homework. Congratulations. They count on people "trusting" them and not doing their own homework. Many people count on others telling them the truth rather than thinking for themselves. Businesses profit from that laziness.

Answer 9

Primeamerica is a 'dog and pony' show. It is all show and no go. Their agents are inexperienced in the financial services arena when they are recruited. They learn what PA wants them to know.

Answer 10

Only one reason - they are trying to get your money. And the more the better. They don't plan on dealing with money-savvy people like yourself.