SLIDE 9: using your BLOC as a banker
Let's Demonstrate How You Can Become a Bank
Say your child just graduated from college and landed a great job. H/she wants to finance a car purchase for $15,000; but it will require you to co-sign for the note. The loan terms are as follows:
Loan Amount: $15,000
Bank Rate: 7.45%
Repayment Term: 48 months
Monthly Payment: $362.33
You have two options:
1: Co-Sign for the Note:
you can co-sign for the auto loan and let your child make the monthly payments as scheduled. The bank will earn all of the interest paid on the loan.
If your child misses a payment or two, your credit record will reflect that (since you are the co-borrower).
If your child fails to make scheduled payments, the bank will require you to make the payments.
2: You can use your BLOC to Finance the Auto:
You can use your BLOC to finance the auto. Your child will be responsible to you for the monthly payments. All of the interest on the loan will be coming to you.
In the event your child misses a payment or two, your credit record is protected since your income deposits are constantly paying your BLOC account.
If your child fails on the loan, you are in a better position since you will be paying your BLOC instead of the bank.
Example:
| BLOC Account Starting Credit Line Balance: $60,000 |
|||||
| Month | BLOC Activity | Advances from BLOC | Payments to BLOC | Balance Owned | |
| Aug Beginning Balance | $500 | ||||
| Aug | BLOC | Advance on Auto | $15,000 | $15,500 | |
| Aug | BLOC | Living Expenses | $4,000 | $19,500 | |
| Aug | Pay | Paycheck | $5000 | $14,500 | |
| Aug | Pay | Auto Payment | $362 | $14,138 | |
| Total Month Activity | $19,000 | $5,362 | $14,138 | ||
| Sep | Total Activity | $4000 | $5362 | $12,776 | |
| Oct | Total Activity | $4000 | $5362 | $11,414 | |
| Nov | Total Activity | $4000 | $5362 | $10,052 | |
| Dec | Total Activity | $4000 | $5362 | $8,690 | |
| Jan | Total Activity | $4000 | $5362 | $7,328 | |
| Feb | Total Activity | $4000 | $5362 | $5,966 | |
| Mar | Total Activity | $4000 | $5362 | $4,604 | |
| Apr | Total Activity | $4000 | $5362 | $3,242 | |
| May | Total Activity | $4000 | $5362 | $1,880 | |
| Jun | Total Activity | $4000 | $5362 | $518 | |
| Jul Beginning Balance | $518 | ||||
| Jul | BLOC | Living Expenses | $4000 | $4,518 | |
| Jul | Pay | Paycheck | $5362 | $(844) | |
| Total Year Activity | $63,000 | $64,344 | $(844) | ||
