wiredotter16 said:I want to introduce you to a specific type of Lombard loan; I noticed nobody here has mentioned this option yet, so it might pique your interest.
Let’s run a scenario. Suppose you don't have $60,000 sitting around in cash, so instead, you take out a home equity loan for that amount. You set aside $10,000 to cover old debts and miscellaneous stuff, then dump the remaining $50,000 into an investment fund. Based on that $50,000 stake, the bank grants you a Lombard loan of $25,000, which also gets funneled straight back into the fund. Essentially, the capital isn't "available" for spending. Some funds have been pulling 50% annual returns or even exceeding 100% over the last few years, but let's be realistic—let's assume you aren't that lucky and they return a modest 30%. Of course, that 30% is working on a total principal of $75,000.
With that $10,000 cushion you kept on the side, you cover your monthly mortgage payments, and for the bank providing the Lombard loan, you simply pay the interest. That $10,000 is enough to service both the mortgage installments and the interest for the next five years. You can run the math on the rest yourselves.
Here is the setup: $75,000 in the fund 30% annual return Compound interest calculation
After five years, the fund sits at $214,000. You pay the bank back its $25,000 credit, leaving you with roughly $190,000—all while having paid off your mortgage installments.
And look, you aren't forced to withdraw the money from the fund after those five years. In that case, you could potentially qualify for a new Lombard loan worth 50% of the fund's value, bringing your total managed capital to about $300,000. After another five years, you’d have upwards of a million dollars in the fund. You pay back the initial $25,000, then the subsequent $100,000, and ten years in, you're looking at a million-dollar balance plus whatever you've cleared on the mortgage.
And all of this started with nothing more than a mortgage on a house or an apartment.
I should clarify: this isn't for everyone. Most people either can't or won't wrap their heads around this strategy because they're too afraid, or for whatever other reason.
But I'm young and reckless enough to see that ten years isn't a lifetime. Even if the fund ends up yielding a measly $300,000 at the end of a decade—which is my pessimistic estimate—I won't make that kind of money in ten years unless I start smuggling cocaine from Colombia.
I'm eager to hear what you all think. If you want to test the theory, try running these numbers with a 15% annual return. Even then, you'll be wealthy by our standards... and you'll be completely financially independent within ten years.
Look, I think most people *can* understand this story... if they lived in a world without actual consequences or risks... you know, a total Teletubbies land where nothing ever goes wrong.
wiredotter16 said:I want to introduce you to a specific type of Lombard loan; I noticed nobody here has mentioned this option yet, so it might pique your interest.
Let’s run a scenario. Suppose you don't have $60,000 sitting around in cash, so instead, you take out a home equity loan for that amount. You set aside $10,000 to cover old debts and miscellaneous stuff, then dump the remaining $50,000 into an investment fund. Based on that $50,000 stake, the bank grants you a Lombard loan of $25,000, which also gets funneled straight back into the fund. Essentially, the capital isn't "available" for spending. Some funds have been pulling 50% annual returns or even exceeding 100% over the last few years, but let's be realistic—let's assume you aren't that lucky and they return a modest 30%. Of course, that 30% is working on a total principal of $75,000.
With that $10,000 cushion you kept on the side, you cover your monthly mortgage payments, and for the bank providing the Lombard loan, you simply pay the interest. That $10,000 is enough to service both the mortgage installments and the interest for the next five years. You can run the math on the rest yourselves.
Here is the setup: $75,000 in the fund 30% annual return Compound interest calculation
After five years, the fund sits at $214,000. You pay the bank back its $25,000 credit, leaving you with roughly $190,000—all while having paid off your mortgage installments.
And look, you aren't forced to withdraw the money from the fund after those five years. In that case, you could potentially qualify for a new Lombard loan worth 50% of the fund's value, bringing your total managed capital to about $300,000. After another five years, you’d have upwards of a million dollars in the fund. You pay back the initial $25,000, then the subsequent $100,000, and ten years in, you're looking at a million-dollar balance plus whatever you've cleared on the mortgage.
And all of this started with nothing more than a mortgage on a house or an apartment.
I should clarify: this isn't for everyone. Most people either can't or won't wrap their heads around this strategy because they're too afraid, or for whatever other reason.
But I'm young and reckless enough to see that ten years isn't a lifetime. Even if the fund ends up yielding a measly $300,000 at the end of a decade—which is my pessimistic estimate—I won't make that kind of money in ten years unless I start smuggling cocaine from Colombia.
I'm eager to hear what you all think. If you want to test the theory, try running these numbers with a 15% annual return. Even then, you'll be wealthy by our standards... and you'll be completely financially independent within ten years.
🙄
And please, for the love of everything, stop using examples like this. We have newcomers here who are just starting to wrap their minds around basic saving, credit, and investing... we shouldn't be feeding them this stuff.
wiredotter16 said:Look, this isn't some hypothetical scenario; it’s my actual life experience, so I know exactly what I'm talking about. Even ironsurfer10 pointed out that credit officers are heavily pushing OMF... Since I don't work in the banking sector, I can't give you a granular, step-by-step breakdown of how they pull extra capital out of thin air, but I think everyone here already gets the gist of what's happening.
Just get the job done, hit your targets, and the money will follow.
Look, whether you’re an employee at a big bank like Chase or Wells Fargo or not is completely irrelevant here. Honestly, if you aren't on the inside, I don't see how you can justify the way certain bank tellers go about extorting people during the loan approval process. It happens all the time—people are desperate, they’re panicking because they need money right now, and they end up agreeing to whatever predatory terms are shoved in their faces just to survive.
And frankly, for the sake of this discussion, which specific teller is doing what is totally beside the point.
Hey there, 🙂 ... try adding some line breaks and spacing next time... make it actually readable 😉
Anyway, back to the point here.
wiredotter16 said:Hey everyone, this is my first time jumping into this thread. The topic caught my eye, so I figured I’d weigh in. Regarding the claim that banks force you to switch to their specific fund when applying for a loan—that isn't entirely accurate. Bank employees operate under all sorts of quotas, like how many loans they need to close in a certain window or how many premium credit cards they have to issue. Part of their job description includes migrating people into their funds. Honestly, the data being presented by ironsurfer10 is a bit off. If you work directly for a fund, the gross pay for converting someone from one fund to another is pretty much a known figure, though some people pull in significantly more. When someone joins a fund for the first time, the gross amount is slightly lower, but those payout examples refer to people employed directly by the fund. As for bank staff, they only see an extra bump in their paycheck if they hit their team targets; usually, that bonus is capped at about 10% of their base salary. To circle back to this whole "requirement" thing—it would be more accurate to call it a "recommendation" from the teller. Of course, the employee isn't to blame if the client perceives it as a mandatory condition for getting the loan. Then again, most people are desperate enough for the credit that this "condition" doesn't even feel like a hurdle; they'll do whatever it takes just to get approved. It’s the same deal with people looking for loans through classified ads. The "requirement" to join a fund comes from the people working for the agency processing the loan. These folks don't actually live off loan commissions; they make their money through life insurance policies and by moving people into funds. Let's be real here: you are taking out a loan because you desperately need it, and I doubt it matters much to you which fund you end up in. Your only priority is getting that money. Since you likely can't get a traditional loan at a major bank like Chase or Bank of America due to a bad credit score or a bankruptcy filing, you're essentially paying a middleman for the service of getting the loan realized. That commission is actually up to five times smaller than what someone working directly for an investment firm would earn. Sorry if I went on a bit of a rant here. Cheers.
Look, I'm sorry, but let's call this what it is: extortion. A "recommendation"? What kind of recommendation is it when you tell someone, "Hey, you'll only get this loan if you move your 401(k) fund or your DMF or your entire paycheck over to us"? I mean, seriously, 🙄hello?
In my book, that is incredibly, incredibly low-class 👎... to operate with that kind of mindset and that kind of approach
I honestly had no clue about this whole guaranteed return thing
ironsurfer10 said:Alright, let me try to break this down one more time. I’ll explain it once more, and then I think I’m done with this topic because it’s getting a bit exhausting. If you really feel like my information isn't accurate, feel free to call any of the investment funds directly and ask them yourself.
So, I’ll walk through how this works both in theory and in practice. Theoretically, your money is protected first by the pension fund itself, then by the custodian bank, then by the SEC, and ultimately by the federal government. However, since the government doesn't want to take on unnecessary debt, the operations of these pension funds are strictly regulated. At the end of every single business day, all transactions made within the fund are reported to the SEC. Every fund is also required to hit a guaranteed minimum return by the end of the year. I’m not entirely sure of the exact percentage, but it’s definitely a positive number. If a fund performs poorly—meaning it shows negative returns over an extended period—the SEC will step in and prohibit them from operating. In those cases, the boards of directors from all active funds meet with the heads of the SEC to decide what happens next. The assets (specifically the total contributions from employers) are then transferred to the account of a custodian bank, and clients can then choose whether they want to stay with the bank that absorbed the failing fund or move to a different one. Essentially, they would still have the total amount contributed by their employer on their account, just without the accumulated returns. In practice, however, negative returns usually only pop up at the very beginning or the very end of the year. Most funds see their peak returns around September or October, but things might dip toward late December. They might continue to slide for a little while after that. Those are just CURRENT returns, and honestly, they shouldn't be a cause for panic.
Now, to answer your specific question. If you contributed $333, and the return is currently negative, it’s true that you don't have that full $333; you actually have slightly less. But you will still have more than the raw total of what your employer contributed, because over the years, you’ve earned interest on top of those payments. Does that make sense?
And regarding what Quincy, or maybe someone else—I can't quite remember if it was even mentioned in this thread—said about how you could potentially end up with less money after 30 years than what was actually contributed by your employer: that simply isn't possible. I explained why above. If a fund fails, it closes down, and the total assets are moved to a custodian bank's account.
Whew... I don't even get asked these kinds of questions at my actual job! But I hope that clears things up for everyone. It’s not like you just put money in and it suddenly vanishes into thin air!
Is there any way to find out what that number actually is? Does it fluctuate depending on which fund you're looking at, or...
Though, I have to admit, that bolded part really threw me for a loop 😵
So, if I put my money into $0.33 back on January 1st, 2008, I’d be sitting on 6.5077 units. But those exact same units? By January 23rd, 2008, they aren't worth nearly as much. $0.33 They've dropped down to $323 just . That means compared to where I started on New Year's Day, I'm looking at a loss of roughly 3.05%.
Now, let's look at the alternative. If I had invested that same amount on January 1st, 2007, I would have walked away with about 6.9503 units. And by January 23rd, 2008, those units would have been valued at $345 . In that scenario, I'd actually be up by 3.543%!
If my exit window had hit during those final $333 months, there is absolutely no way I would have received $333. Instead, I would have likely only seen $323, or—given what you're claiming about the insurance coverage—maybe I would've managed to get $333.
Where can I actually find the unit value broken down by period? I’ve been scouring the site, but all I can find is the data for the voluntary contributions. Every time I try to pull up the chart for the mandatory ones, the system just refuses to load it. It won't even open the graph 😢
Look, if we’re talking about PayPal ... you should really go ask over in that specific thread ... those guys are absolute experts when it comes to this kind of stuff
For most Americans, your baseline for getting anything done is your credit score => your ability to borrow
We don't really deal with the kind of mortgage structures you see elsewhere => if you actually own property outright, the banks don't even care about your monthly cash flow...
But when it comes to standard housing loans, there's no way around it: you have to put up collateral in the exact ratios these big banks demand, AND—this is the part that drives me crazy—you absolutely MUST be able to prove a steady, reliable monthly income. No exceptions.
But there's a catch with how those shares are frozen...
For instance, if you have $33 (just off the top of my head) 490 shares => they get blocked => which means you can't touch them until that loan is paid off, even though they’re still subject to market gains or losses
hiddensailor60 said:I’d honestly love to pull a Lombard loan through Chase, but it feels like they wouldn't even touch that request. Am I wrong about that?
Oh, they absolutely do... you can get up to 50% of the value at a 7.49% rate.
hiddensailor60 said:I’d also jump on a home equity loan at JP Morgan Chase, but since I'm currently unemployed, does that actually matter? I mean, logically, why would they care? They're holding a collateral stake that's 10% higher than the loan itself, so what's the issue? Just asking.
With a Lombard loan, your creditworthiness isn't really a factor—it's all about the collateral, so it shouldn't be an issue... though I remember reading somewhere that certain banks *do* look at income requirements... I can't quite recall which specific bank it was, though.🤔
Look, you start by pinching pennies... then you scrape together a little more... until you finally have a decent little pile of cash sitting there. From there, you start putting it to work—utilizing things like high-yield savings accounts, moving into mutual funds, maybe even picking up some stocks and whatnot... just taking it one step at a time. Every single journey starts with a struggle. 🙂
feralheron90 said:You hand the bank $333, (and honestly, that might be the biggest hurdle if you don't have them on hand).
Small correction here, 😁 you aren't handing anything over to the bank... you're setting up a CD in your own name.
feralheron90 said:I'm thinking they can't go longer than 60 months.
Actually, they can go longer... Chase offers terms up to 15 years, though it really depends on which specific collateral you're using 😉 ...
feralheron90 said:The bank pays out the other $333 and you're free to use those however you want.
The maximum I could find via the Federal Reserve was 95%.
feralheron90 said:Interest rates on these types of loans are usually the lowest among all cash loans—I don't have the absolute latest data right in front of me, so I might be slightly off.
It's the CD rate plus 1.5% (according to the Federal Reserve, though that feels a bit low to me 😲)
feralheron90 said:Once the loan term ends, you still have both the car and the money, and the interest you paid was minimal...👍