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MobilityBundle Regular user Las Vegas/Boston 120 Posts |
No credit? No job? Recent bankruptcy? No problem! We will lend you money for a hou... errr.... car! Just sign on the dotted line!
http://dealbook.nytimes.com/2014/07/19/i......ogs&_r=0 To add a little color to the story, I actually find the borrowers in this case a little more sympathetic than the borrowers in the housing bubble. In the housing bubble, people were signing up to buy houses they knew or should have known they can't afford, because they were swept up in the greed (or put more charitably, optimism) of their time. The world was rocking and rolling, and everyone wanted their taste. With the sub-prime car loans, it seems like the people knew how dire their situations were. But I get it: your credit is shot, and one day you get a lifeline. It's not necessarily so much about the conspicuous consumption of having a new car, but it's about an opportunity to rebuild credit. |
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AGMagic Special user Cailf. 775 Posts |
One cannot get out of debt by securing more debt.
Tim Silver - http://www.facebook.com/pages/Magic-Woodshop/122578214436546
I know you believe you understand what you think I said, but I am not sure you realize that what you heard is not what I meant. Visualize Whirled Peas! |
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silvercup Loyal user 223 Posts |
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On Jul 21, 2014, AGMagic wrote: Sure! Just make it up in volume. |
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LobowolfXXX Inner circle La Famiglia 1196 Posts |
You can't get out of debt BY securing more debt, but securing more debt can be a useful (or even necessary) step toward getting out of debt, depending on the interest rate.
"Torture doesn't work" lol
Guess they forgot to tell Bill Buckley. "...as we reason and love, we are able to hope. And hope enables us to resist those things that would enslave us." |
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tommy Eternal Order Devil's Island 16532 Posts |
Actually you can depending on what you put it on.
If there is a single truth about Magic, it is that nothing on earth so efficiently evades it.
Tommy |
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Ray Tupper. Special user NG16. 749 Posts |
There's good debt and bad debt.
What do we want?
A cure for tourettes! When do we want it? C*nt! |
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LobowolfXXX Inner circle La Famiglia 1196 Posts |
Quote:
On Jul 21, 2014, Ray Tupper. wrote: Cue General Magician in 3...2...1...
"Torture doesn't work" lol
Guess they forgot to tell Bill Buckley. "...as we reason and love, we are able to hope. And hope enables us to resist those things that would enslave us." |
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General_Magician Special user United States 707 Posts |
There is no good debt! It's all BAD! Only the banks and finance companies like debt and don't have to pay the price when the market collapses because they have politicians bought off who will give them a taxpayer bailout! So they make money off the interest off giving loans nobody should get because they can always count on taxpayer bailout! Pay cash for everything and never take out a loan. Live within your means and keep an emergency cash reserve handy for unexpected expenses, that way, you never have to go into debt. The whole credit system is rigged to keep the banks and finance companies rich no matter what (and you are punished if you don't take out a loan because then you have no credit, but who cares as long as you keep a substantial emergency cash reserve handy, why take out a loan when you are being responsible with money and don't need a loan in the first place?)
If everybody was like me, the banks would just get the politicians they bought off to pass a law to force us to take out loans that way they can still keep making money even if nobody wanted to take a loan out. If you can't afford a car, ride a bike or use shoe leather express. If you got a good used vehicle like I do and can't afford a new car, then don't buy one, just keep up the maintenance on your vehicle and you can always get a good used engine out of the junkyard if you old engine goes. Much cheaper than brand new engine or a rebuilt engine. I had gotten a good used engine for my car out of the junkyard before I wrecked it (wasn't my fault so the other person's insurance company paid me off and given that I owned the car outright, no money went to a bank or finance company, it all went to me). I paid cash to the dealer when I first purchased that used car (04 Chevy Cavalier and purchased in 2010 but wrecked it last year) that I wrecked later on and never financed a vehicle in my life. PS- Had to make the post given that Lobo was counting down for me to respond with my typical post on debt. LOL!
"Never fear shadows. They simply mean there is a light shining somewhere nearby." -unknown
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S2000magician Inner circle Yorba Linda, CA 3465 Posts |
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On Jul 22, 2014, General_Magician wrote: These are overstatements. |
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NYCTwister Loyal user 267 Posts |
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On Jul 21, 2014, AGMagic wrote: Tell that to the U.S. government.
If you need fear to enforce your beliefs, then your beliefs are worthless.
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LobowolfXXX Inner circle La Famiglia 1196 Posts |
Quote:
On Jul 22, 2014, General_Magician wrote: I had a friend who owned a payday advance company - the business model was, essentially, that he made high interest, short-term loans. Money came into the business twice a month, on or about the first or the 15th. The amount of money he made was limited by the amount he has to lend out, in the early days. That is, he had more potential customers than he had money to loan them all. When he ran out of money before payday, he would offer to borrow money from me and pay me 1% per day. His loans went out at about 17.65% until payday. So if you borrowed $100 and you got paid in three days, you'd pay back $117.65 in three days. Let's say I could get cash advances from my credit card company at 24% annually. Obviously, it would be VERY good debt for me to borrow from my credit card company! and it would be VERY good debt for my friend to borrow from me at 1% per day (365% annually(!!!!)) Let's say he ran out of money with four days to go, and I borrow $5,000 to loan him. And let's say I even pay a full month's interest (24/12 months, or 2%). I pay my credit card company back $5,100. But I get back $5,200 ($50/day for four days). That's a 2% profit in less than a week. I'm Pretty sure your index funds aren't turning that. As for my friend, the loan cost him $200. But he made $5,000 x 17.65%, or $882.50. So borrowing money at 365% interest was even better for him than borrowing at 24% was for me. It's all relative. What does the money cost, and what can you get with it?
"Torture doesn't work" lol
Guess they forgot to tell Bill Buckley. "...as we reason and love, we are able to hope. And hope enables us to resist those things that would enslave us." |
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General_Magician Special user United States 707 Posts |
Quote:
I had a friend who owned a payday advance company - the business model was, essentially, that he made high interest, short-term loans. Money came into the business twice a month, on or about the first or the 15th. The amount of money he made was limited by the amount he has to lend out, in the early days. That is, he had more potential customers than he had money to loan them all. When he ran out of money before payday, he would offer to borrow money from me and pay me 1% per day. His loans went out at about 17.65% until payday. So if you borrowed $100 and you got paid in three days, you'd pay back $117.65 in three days. Let's say I could get cash advances from my credit card company at 24% annually. Obviously, it would be VERY good debt for me to borrow from my credit card company! and it would be VERY good debt for my friend to borrow from me at 1% per day (365% annually(!!!!)) What would happen if your friend's customers defaulted on loans for some reason and then all the sudden he was unable to pay you back? You would have to go through the trouble of taking him to court, getting a judgement against him and then seeking to collect the money he owes you or possibly put a lien and foreclose on his assets to satisfy the judgement and that's only if you lent the money to him to where he would be personally liable for paying you back (some companies may seek to get you to sign a contact that is between the company and you rather than themselves personally and you; but you being a lawyer, I would assume you were smart enough to lend him the money, possibly under a contract that would hold him personally liable rather than his company if he was even incorporated or had an LLC organized). Your friend would also have to worry about you suing him to recoup the money you lent him and possibly losing some of his own personal assets in such case. Of if he has no assets to put a lien on then you could just turn his name over to a credit reporting agency since he was unable to satisfy the judgement and you were unable to collect on the judgement. It would give him bad credit. Anytime you lend money to somebody, you are risking the fact that person could default on the loan you are making. And if you are lending somebody else's money to a customer, then you are running the risk that customer doesn't pay back that loan and that leaves you on the hook to pay the creditor (which would have been you in this case) who lent you the money to lend to other people.
"Never fear shadows. They simply mean there is a light shining somewhere nearby." -unknown
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MobilityBundle Regular user Las Vegas/Boston 120 Posts |
Quote:
General_Magician replied: Yeah. There's risk associated with everything. What if you become a widget salesman, but the raw materials cost of widgets doubles in price? What if you become a doctor, but they cure all diseases? Or maybe more germane to your personal situation, what if you become a professional magician but nobody wants to hire you at the price required by your business model? The fact that there's risk associated with any of these pursuits is not a reason to not engage in any of these pursuits. I'm not suggesting risk be ignored. I'm suggesting risk should be identified and dealt with accordingly. In Lobo's friend's example, he mitigates risk by managing the interest rate. Lending money is a numbers game: if he makes 100 high-risk loans, maybe he can expect 30 of them to default. He sets the interest rate high enough so that, assuming those 30 defaults happen, he still hits the revenue goals he wants. If you're going to discard a course of action SIMPLY because there's a potential way for it to go wrong, you're going to spend a lot of time on the couch. (But wait... what if the couch catches fire? Better find somewhere else to go.) |
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LobowolfXXX Inner circle La Famiglia 1196 Posts |
Quote:
On Jul 22, 2014, General_Magician wrote: If that's the type of nightmare scenario you're going to base your investment decisions on, my advice to you is to take all the money you earn and keep it in a big fireproof safe. What if every company on the stock market goes bankrupt the same day and your index funds become worthless? The money I loaned my friend was extremely safe. More specifically, his clients were federal employees who had been credit checked, whose bank information he had, and who were legally unable to quit their jobs. And in case you missed the rate of return, it was over 180% annualized.
"Torture doesn't work" lol
Guess they forgot to tell Bill Buckley. "...as we reason and love, we are able to hope. And hope enables us to resist those things that would enslave us." |
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MobilityBundle Regular user Las Vegas/Boston 120 Posts |
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On Jul 22, 2014, LobowolfXXX wrote But what if he forgets the combination!? Sounds a little risky to me. |
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mastermindreader 1949 - 2017 Seattle, WA 12586 Posts |
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On Jul 22, 2014, LobowolfXXX wrote: I suspect that William isn't aware of how these payday loan outfits operate. |
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AGMagic Special user Cailf. 775 Posts |
Quote:
On Jul 22, 2014, NYCTwister wrote: God knows I've tried!
Tim Silver - http://www.facebook.com/pages/Magic-Woodshop/122578214436546
I know you believe you understand what you think I said, but I am not sure you realize that what you heard is not what I meant. Visualize Whirled Peas! |
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General_Magician Special user United States 707 Posts |
You are correct Bob, I am not aware of how these pay day outfits work. The interest rates are pretty high from what I hear though. I certainly understand that their is risk in every investment, including my index funds, but my questions were directed as far as pointing out the fact that their is risk in lending money to people. However, it's important to minimize risk. Even if you minimize your risk, it's still no guarantee. Me personally, I would want to know how much assets this pay day company had in relation to it's debt as well as the credit worthiness of the company before lending it money. There is always a possibility the company's clients default on it's obligations and I would want to be sure the company wouldn't default on it's obligations to me. So part of minimizing risk for me would be taking a look at the company's financial statements and seeing how much debt it has in comparison to equity. I would want the company have much more equity than debt as well as a good credit rating before I would lend money to the company. I would also want to know it's business practices and it's practices in minimizing it's own risks of having their clients default on their loan obligations.
"Never fear shadows. They simply mean there is a light shining somewhere nearby." -unknown
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S2000magician Inner circle Yorba Linda, CA 3465 Posts |
Quote:
General_Magician replied: No, there isn't. That's the definition of arbitrage: riskless profit. |
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tommy Eternal Order Devil's Island 16532 Posts |
Money is not what the government tells you it is ... it's people.
If there is a single truth about Magic, it is that nothing on earth so efficiently evades it.
Tommy |
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