Are Loans at 50% interest crazy?

[fris]

Curious say someone lends you 5k, so $7500 in return, is that nuts?

[Deputy Chief Command]

crazy from who's point of view? the one lending or the lender?

as far as I know payday loan "scams" charge a lot higher interest

[Dvae]

Originally Posted by fris

Curious say someone lends you 5k, so $7500 in return, is that nuts?

It depends. Is said lender a Loan Shark?

[Socks]

It's crazy to think someone that needs $5k now can pay $7,500 back in a short amount of time.. Better be prepared for plan B.

[L-Pink]

Originally Posted by Socks

It's crazy to think someone that needs $5k now can pay $7,500 back in a short amount of time.. Better be prepared for plan B.

Yea, unless someone is waiting for a closing date or judgement that will give them a large chunk of cash by a certain date you aren't getting paid back.

[BIGTYMER]

Look at the interest rate on some credit cards.

[Barry-xlovecam]

It depends on the Term of the Loan -- 10 or 20 years normal.

For a year as example; It is at very least usury if an unlicensed lender, and in respect to any regulated loan -- deemed unconscionable and forfeit in most courts.

However, it is a relatively small amount to risk so offer a % of the profit as a joint venture. If there is no profit to be made don't take the money.

[Barry-xlovecam]

Originally Posted by L-Pink

Yea, unless someone is waiting for a closing date or judgement that will give them a large chunk of cash by a certain date you aren't getting paid back.

We used to make swing loans -- that is an conscionable rate of interest 50% most investors would be tickled pink with 15% in a year these days. We had all the interest reduced by court order (to the court judgement rate -- lo ball rates) on a risky 3rd Trust Deed (mortgage) loan we made once -- learned the hard way. In the end the borrower defaulted, sued us over the rate of interest to stop the foreclosure sale, then the property was condemned, discovered next to a toxic-waste dump in a LA suburb in the San Gabriel Valley. $60K face value -- we lost, got scammed, the owner booked with our money. Our security interest was in the property (worthless now).

We had a CFL (Consumer Finance Lender) license in California and the loan was made under a Real Estate broker's license c. 1981 (no statutory interest limit). We got fucked over good on that one.

[fris]

im speaking of short term, like couple months

[shake]

Yes, I think it's crazy myself.

[Juicy D. Links]

Originally Posted by fris

im speaking of short term, like couple months

short term , ie same as loan sharks n stuff its about right...

[brassmonkey]

if your credit is good get a loan from a bank or credit card. business or personal?

[Max Potential]

Originally Posted by fris

Curious say someone lends you 5k, so $7500 in return, is that nuts?

That is way too open of a question, as it really depends on the length of time on the loan and the payback method.

Most 'loan sharks' I have ever known charge 10% per week, collectible each 7 days. So on a 5k loan, you pay $500 a week and after 10 weeks you have paid 100% in interest and still owe the principal in full. Miss a payment, lose a finger.

[MaDalton]

everything over 5% per year is considered risky in terms of investment i learned

[2MuchMark]

Originally Posted by fris

Curious say someone lends you 5k, so $7500 in return, is that nuts?

It's nuts if you are the one borrowing the money, but easy cash for the lender. Even if it is a bank or credit card giving you years to pay it back, it's still a ripoff for you.

If you need to borrow money, here's some tips:

- Lending is big business, and lends will compete to get your business. Shop around
- Paying back the loan faster will save you money. Make sure you have that option.
- Never make the minimum payment. Each payment back should be as much as you can afford.

- Only suckers pay 19% interest rate on credit cards. If you are paying this now on any card, call the card company and ask for a lower rate. Trust me, you will easily get 14% or even 9% just by asking. If they don't want to give it to you, tell them the competing card company (Mastercard for example) already offers it.

- Many card companies will offer you a huge discount on big loans like $5000. Even if you are paying 19%, call your card company and tell them you want $5000. They will give you the money via direct deposit to your checking account for 4.5% or less. (*)

- (* there is a catch. Most of the time they will give you 4.5% as long as you pay the loan back within 6 months. If you go past 6 months, the rate may increase to their normal rate of 12% or 19% or whatever you pay now. So if you take this route, do your best to pay it back.

- You can also try your bank but usually they make it more difficult to borrow money, however they have a cool product known as a debt reconciliation loan. The bank will lend you money to pay off your debts (credit card, government, etc), at a rate much cheaper than you are already paying. Doing this gives you 1 monthly payment to make every month, and saves your credit rating if you were in danger of messing it up by not keeping up with your payments.

Finally, lenders WANT to work with you. They are selling you a super profitable service after all. The easier you make it for them, the more they like you.

[seeandsee]

loan sharks are in banks too

[CurrentlySober]

The 69-year-old American, who pocketed £7million in wages and bonuses last year, is the mastermind behind one of the biggest payday lending firms in the UK ? targeting borrowers with interest rates as high as 2,670 per cent.

Read more: http://www.thesun.co.uk/sol/homepage...#ixzz2FumdFqPf

[BareBacked]

pretty sure its illegal

[kane]

Many of those payday loan and pink slip loan places charge around 400% APR interest for their loans and some of them charge even more than that.

During the summer when I would watch the Mariner games they sometimes had a commercial where you could get $10,000 loan with just a signature. If you paused it and read the fine print it said you would pay it back at $850 per month for 60 months so you would pay back $51,000. Pretty crazy.

[TCLGirls]

Originally Posted by seeandsee

loan sharks are in banks too

other kind of shark are in ocean too

[rowan]

I looked up one of the places that was heavily advertising on TV. They charge $38 per $100 you borrow, with the loan repaid in 4 weeks, regardless of the loan amount. So a $1000 loan costs you $380 in "fees"

I think that means the effective p/a rate would be (38% / 4 weeks) * 52 weeks = 494% ?

There are also some pretty scary fees tacked on if you get behind: $30 missed payment fee, $50 arrears processing fee. So one late payment on a $200 loan and your balance increases by $80, presumably payable immediately... so instead of $50 that week you owe them $130.

I can see how people desperate enough to take out this type of ripoff loan could get even further into the shit. Payday loans are a scam that prey on the people who can least afford it.

[Barry-xlovecam]

Payday Loans are not loans at an interest rate -- they "factor" a check: (Trade in the buying and selling of personal property (your bank draft [check]).

Simpler example: A pawnshop of checks.

Pawnshops are regulated. However, subject to individual state laws (in the USA) an individual can buy property and sell it ;)

A repurchase agreement, also known as a repo, RP, or sale and repurchase agreement, is the sale of securities together with an agreement for the seller to buy back the securities at a later date. The repurchase price should be greater than the original sale price, the difference effectively representing interest, sometimes called the repo rate. The party that originally buys the securities effectively acts as a lender. The original seller is effectively acting as a borrower, using their security as collateral for a secured cash loan at a fixed rate of interest.

A repo is equivalent to a spot sale combined with a forward contract. The spot sale results in transfer of money to the borrower in exchange for legal transfer of the security to the lender, while the forward contract ensures repayment of the loan to the lender and return of the collateral of the borrower. The difference between the forward price and the spot price is effectively the interest on the loan, while the settlement date of the forward contract is the maturity date of the loan.
http://en.wikipedia.org/wiki/Repurchase_agreement

This is a $5 trillion market (*At the end of 2004, the US repo market reached US$5 trillion)-- same idea really but legitimized by SEC regulations and license -- securities are personal property. (In essence; the same as your auto or diamond ring.)

The 1% don't play for nickels and dimes ...

[CrocMint]

Those who take payday loans they're paying ~20% don't they...
if someone pays 20%, another would pay 50%, nothing too surprising for me

[bushwacker]

Originally Posted by Max Potential

That is way too open of a question, as it really depends on the length of time on the loan and the payback method.

Most 'loan sharks' I have ever known charge 10% per week, collectible each 7 days. So on a 5k loan, you pay $500 a week and after 10 weeks you have paid 100% in interest and still owe the principal in full. Miss a payment, lose a finger.

Nah, a typical loan shark charges 3pts. a week. Unless you borrow a large amount, then you might get a better rate.

[Jel]

Originally Posted by Max Potential

That is way too open of a question, as it really depends on the length of time on the loan and the payback method.

Most 'loan sharks' I have ever known charge 10% per week, collectible each 7 days. So on a 5k loan, you pay $500 a week and after 10 weeks you have paid 100% in interest and still owe the principal in full. Miss a payment, lose a finger.

This doesn't add up. 5k loan week 1 = 500, leaves 4500 week 2 = 450 leaves 4050 week 3 = 405, and so on. Not saying that isn't expensive, but you don't still owe the full amount, nor have you paid 5k, after 10 weeks.

[Pipecrew]

Originally Posted by Jel

This doesn't add up. 5k loan week 1 = 500, leaves 4500 week 2 = 450 leaves 4050 week 3 = 405, and so on. Not saying that isn't expensive, but you don't still owe the full amount, nor have you paid 5k, after 10 weeks.

You are not paying down the loan, you are paying down the interest. It's like an interest only loan. You still owe the 5k regardless of what you have spent on interest.

It's the American way!

[Jel]

Originally Posted by Pipecrew

You are not paying down the loan, you are paying down the interest. It's like an interest only loan. You still owe the 5k regardless of what you have spent on interest.

It's the American way!

Sorry yeah I totally mis-read that

When I was in prison I sold tobacco at 100% per week, it really is insane what people will pay when they are desperate, had a few guys buy 1/2 oz tobacco off me one week, and just continued owing me an oz, but only paying me 1/2 oz, for months and months and months. Fucking madness.

[EddyTheDog]

Whats happening in the UK at the moment is a scandal.

We are talking 7000% + loans. All legal.

There are some people borrowing for stupid reasons - There are also some who are borrowing so they do not freeze this winter.

That is down to the government.

[Doctor Dre]

Originally Posted by Barry-xlovecam

It depends on the Term of the Loan -- 10 or 20 years normal.

For a year as example; It is at very least usury if an unlicensed lender, and in respect to any regulated loan -- deemed unconscionable and forfeit in most courts.

However, it is a relatively small amount to risk so offer a % of the profit as a joint venture. If there is no profit to be made don't take the money.

In canada criminal usury is 60% a year, except for loans 1500$ and under (payday loans are regulated by each province, legal in some, illegal in others, takes a liscence everywhere).

HOWEVER, the jurisprudence for civil cases is 35% maximum.

[Doctor Dre]

Originally Posted by Barry-xlovecam

Payday Loans are not loans at an interest rate -- they "factor" a check: (Trade in the buying and selling of personal property (your bank draft [check]).

Simpler example: A pawnshop of checks.

Pawnshops are regulated. However, subject to individual state laws (in the USA) an individual can buy property and sell it ;)



This is a $5 trillion market (*At the end of 2004, the US repo market reached US$5 trillion)-- same idea really but legitimized by SEC regulations and license -- securities are personal property. (In essence; the same as your auto or diamond ring.)

The 1% don't play for nickels and dimes ...

There have been studies done by every province in canada on the real cost of offering payday loans.

Every independant agency concluded that the real cost, advertising cost excluded, lays between 22 and 27% of the total ammount borrowed.

That mean just to break even on a 500$ loan you have to charge back 125$ in fees/interest.

The rate of default is high.

[Max Potential]

Originally Posted by Jel

This doesn't add up. 5k loan week 1 = 500, leaves 4500 week 2 = 450 leaves 4050 week 3 = 405, and so on. Not saying that isn't expensive, but you don't still owe the full amount, nor have you paid 5k, after 10 weeks.

LOL, try to feed that one to the sharks.

In most real loan shark scenarios you are only making interest payments on a weekly basis. Normally you must pay the principal amount back in full, in one lump sum. You can carry this loan on as long as you like, as long as you can continue to make the interest payments weekly, or until you can pay off the loan in full.

AND, make for absolute certain you can pay the loan back, on time every time, or that you can function without a finger, or two, or three...

[Jel]

Originally Posted by Max Potential

LOL, try to feed that one to the sharks.

In most real loan shark scenarios you are only making interest payments on a weekly basis. Normally you must pay the principal amount back in full, in one lump sum. You can carry this loan on as long as you like, as long as you can continue to make the interest payments weekly.

AND, make for absolute certain you can pay the loan back, on time every time, or that you can function without a finger, or two, or three...

yeah, as stated, totally read it wrong

[BlackCrayon]

some retail credit cards charge almost 30% so i gues 50 isn't far off from that. typically the only people i would think would take such a loan would be shady people doing shady shit.

[Max Potential]

Originally Posted by Jel

yeah, as stated, totally read it wrong

Back in the 90's I would regularly float 50k a week, I used to get involved in these types of 'loans' on a regular basis for 5-25k. I NEVER fucked up at all anytime I was involved, but I do know quite a few folks that did and really did lose pinky fingers along the way, or got the absolute shit beat out of them. Usually when I would get involved in these type of loans I would already have the principal cash set aside to pay back the loan to begin with, but did it to avoid wiping out the majority of my liquid cash at the moment.

If you are looking for loans like this, just hang out at some of the NYC strip clubs for a little while or find out where the after hours parties are happening, you won't have to find them, they will find you ;)

[Jel]

I'll be on the next flight out

[Max Potential]

Originally Posted by Jel

I'll be on the next flight out

That's usually the famous last words of guys that can't pay back their loans.

[fris]

Originally Posted by BareBacked

pretty sure its illegal

im speaking of lending someone like in the industry, etc.

nothing official.

[Doctor Dre]

Originally Posted by fris

im speaking of lending someone like in the industry, etc.

nothing official.

Make sure the re-payment terms are clear. Installements frequency, payment dates, penalities.

Write a contract to ensure it.

50 % interest for a year + is not illegal in most places.

[VGeorgie]

There are numerous companies in the US that offer so-called signature loans with annual interest rates of 180% or more. It's perfectly legal, and they make their money on a relatively small number of people who pay for a year or two, then go bankrupt anyway. No one takes out a $2,500 loan with interest amounting to over $13 a day unless they are desperate.

Don't believe me? Take a look at this as an example.

http://www.cashcall.com/Rates/CurrentRates.aspx

It is legal, but shouldn't be.

[mineistaken]

Usually its crazy, 50% is crazy even for one year, let alone few months.
However sometimes you find good opportunities where you can lets say double your money in few months so 50% is ok. Of course lender must have some guarantee.

[Doctor Dre]

Originally Posted by mineistaken

Usually its crazy, 50% is crazy even for one year, let alone few months.
However sometimes you find good opportunities where you can lets say double your money in few months so 50% is ok. Of course lender must have some guarantee.

There are no guarantees when you charge 50% interest rate... otherwise the borrower could go somewhere and get it at a lower rate.