Online installment loans have taken the subprime market by storm • Hacker News Board

Re: Online installment loans have taken the subprime market by storm

#211

Post by p1mrx » Tue, Oct 29, 2019, 6:19 PM UTC

basch wrote: post #72

rootusrootus wrote: post #45

Earlier quoted context omitted.

Be careful with balance transfers. At 18 months, a 3% fee is like a 3.75% APR. If the balance transfer is only 12 months, it's about 5.5%. Still a lot better than a subprime installment loan, but a 3% fee is not a 3% APR.

But minimum payments are super low, so you can store the cash somewhere high interest and pay most of it back in a lump sum. If cash is 2% right now, your minimums might be $90-100ish a month, and the rest can wait till month 12. Theres little to no incentive to pay it off early except to lower your utilization. A 10,000 3% loan over the course of one year equal payments has $147.00 interest. A 3% transfer has $300,…

I don't think there are any savings accounts with >= 3% APY right now. How could it ever be profitable to borrow money at a higher interest rate than you earn by holding it?

Or, if "somewhere high interest" refers to the stock market, then you risk not being able to pay back the loan in a year.

Re: Online installment loans have taken the subprime market by storm

#212

Post by ceejayoz » Tue, Oct 29, 2019, 6:20 PM UTC

geggam wrote: post #81

CydeWeys wrote: post #69

Earlier quoted context omitted.

They don't, though. Once someone turns 18 they are legally no one's responsibility but their own self's.

So you quit loving your mom and dad at 18 ? And Im callous ?

You're getting it backwards.

Your parents are only legally required to care for you up until your 18th birthday. Their function as a safety net may end at that moment. Plenty of folks have shitty, abusive, or neglectful parents who wash their hands of their children at the first opportunity.

Re: Online installment loans have taken the subprime market by storm

#213

Post by ianleeclark » Tue, Oct 29, 2019, 6:22 PM UTC

geggam wrote: post #205

ianleeclark wrote: post #141

Earlier quoted context omitted.

> What is stopping them from starting the business ? Resources, obviously. If someone is screwed enough to have to reach for pay-day loans, that indicates they don't have enough resources. Likely their other credit lines are maxed out and their social support nets are either completely dissolved or just as illiquid as the prospective borrower is. So they can't invest any starting capital into the investment. The seco…

You mean they cant go around cleaning houses / cooking for people or some other service job ? Why do undocumented workers come here for the opportunity ?

> Why do undocumented workers come here for the opportunity ?

Because the United States has a bad habit of bombing their countries, killing their labor leaders, and destabilizing their economies through forced privatization and resource extraction.

Re: Online installment loans have taken the subprime market by storm

#214

Post by kirykl » Tue, Oct 29, 2019, 6:22 PM UTC

ceejayoz wrote: post #80

kirykl wrote: post #67

Earlier quoted context omitted.

If they are in the ballpark of bankruptcy, their credit score will already be destroyed. Bankruptcy will actually improve a credit score

Bankruptcy will eventually improve the score. It's not instant, and may substantially worsen it in the short term. Some organizations that do credit checks may also have a "no recent bankruptcy" policy despite accepting lower credit scores. Not everyone's way behind at the time they declare bankruptcy, either. We did it because six figures worth of medical debt was ceasing to be juggleable, and disability approval (a…

I agree, bankruptcy is an unfortunate solution for unexpected medical debt, as it impacts ones consumer credit score. FWIW the GP comment was referring to "banks who loan money to folks who cannot afford it" which implies baling out consumer debt instead of filing for bankruptcy

Re: Online installment loans have taken the subprime market by storm

#215

Post by geggam » Tue, Oct 29, 2019, 6:22 PM UTC

awinder wrote: post #133

geggam wrote: post #79

Earlier quoted context omitted.

I have very few friends. I have a discriminating taste aka standards. Something society has lost.

~whoosh~

You choose what to respond to, if I wanted to be offended I could have. If I wanted to take a kumbaya moment from that I could have.

I responded the way I wanted to. Implying I am unintelligent because of that is a limited perspective.

Re: Online installment loans have taken the subprime market by storm

#216

Post by gnopgnip » Tue, Oct 29, 2019, 6:24 PM UTC

gruez wrote: post #161

rootusrootus wrote: post #45

Earlier quoted context omitted.

Be careful with balance transfers. At 18 months, a 3% fee is like a 3.75% APR. If the balance transfer is only 12 months, it's about 5.5%. Still a lot better than a subprime installment loan, but a 3% fee is not a 3% APR.

> At 18 months, a 3% fee is like a 3.75% APR. If the balance transfer is only 12 months, it's about 5.5%. How are you getting those numbers? I used an online APR calculator and for 12 months, the APR is 3.057%, nowhere near 5.5% you claim. https://www.calculator.net/apr-calculator.html?cloanamount=1...

Because the fee is paid upfront, and this is assuming you make equal payments each month for 12 or 18 months. Compared with a loan that charged normal interest it would only accrue on the current balance, and the interest you pay each month goes down as the principal goes down. If you had a 12 month balance transfer and made only minimum payments, then paid off the lump sum at the end it would be lower APR.

Re: Online installment loans have taken the subprime market by storm

#217

Post by southphillyman » Tue, Oct 29, 2019, 6:25 PM UTC

logicchains wrote: post #171

christophilus wrote: post #143

Earlier quoted context omitted.

This brings up a tangential question I've had lately. When I played video games (especially RPGs), I always ended the game with a mountain of unused resources at my disposal. I rarely used items, cash, etc, unless the ROI was plainly evident. Many of my friends would just burn through cash / items as soon as they had them, and were often in a bind during tough battles / situations. I wonder if this followed us into l…

There was a studying showing that the trait behind this tendency towards saving, the ability to delay gratification, is present relatively early in childhood, and has strong predictive effect on success in life: https://en.wikipedia.org/wiki/Delayed_gratification#The_Stan... . Perhaps this implies that no matter how rich society gets, there'll always be people who just burn though whatever they earn. This would parti…

>this tendency towards saving, the ability to delay gratification, is present relatively early in childhood, and has strong predictive effect on success in life

This really resonated with me. As a child I use to eat my food "in order", saving the best part for last. Now I'm thinking about all the instances where I've delayed gratication in my life. I've always saved money at an above average rate but never really made this connection before.

Re: Online installment loans have taken the subprime market by storm

#218

Post by jcater » Tue, Oct 29, 2019, 6:25 PM UTC

llamataboot wrote: post #202

andyjsong wrote: post #192

Earlier quoted context omitted.

At least with the peloton purchase, it sounds like they are using Affirm. Generally if you have good credit, interest rate is zero. I've seen it on other high ticket items for sale online. In this case Affirm reduces the friction of buying higher priced products. The phone I'm typing on now was financed through symphony credit. Zero interest, and 36 monthly installments. I'm sure there are penalties if I don't pay ev…

I don't know - I have seen lots of zero interest offers - but never from Affirm. I have a 750+ credit score and last time I looked at Affirm for something (a glowforge I think), interest rates offered were above 21%!

They do, as I bought a Peloton using Affirm. I was ready to pay cash, but they offered to do an interest free, no fee loan thru Affirm and split it across a couple of years. So I did it, because why not?

I’m guessing this was probably an arrangement between Peloton and Affirm to where the former paid some fee to the latter, and all of that is absorbed as marketing overhead just to get more people buying bikes.

Re: Online installment loans have taken the subprime market by storm

#219

Post by sudosteph » Tue, Oct 29, 2019, 6:26 PM UTC

reverend_gonzo wrote: post #100

bryanlarsen wrote: post #71

Earlier quoted context omitted.

> $100 a month on cable TV given that the average American spends 4 hours/day watching TV[1], that's well under $1 per hour of entertainment. There aren't a lot of hobbies or entertainment media that are cheaper. 1: https://www.statista.com/statistics/186833/average-televisio...

Huh? Books, sports, art, music, are all way cheaper forms of entertaining oneself. Most hobbies or entertainment don't have a charge per hour.

Almost everyone I know who considers music a hobby ends up spending a pretty good penny on it once they really get into it. It can easily be one of the most expensive hobbies someone has (it is for me at least). Once you've learned the basics, half of the fun is collaborating with others or recording.

Costs:

- Instruments & accessories (serious guitar players often have at least one acoustic and one electric - and good quality ones are going to be at least $500, but could go way higher. Other accessories: at least a metronome and tuner, potentially also some pedals, amps, drum machine, etc)

- Renting/owning/traveling to a practice space if playing in a group

- Educational material: Lessons, Books, sheet music, music apps

- Recording / mixing equipment

Sure you can get a used acoustic guitar and watch youtube videos to learn it - but I don't know many people who do that and stick to it.

The real up-side though, is that decent musical gear doesn't lose a ton of value over time unless it gets broken or stolen. Also, if you're not professional, you can pace out your purchases.

My personal collection grew over 10 years, and is just for amateur use, jamming with friends mostly. I've got a couple guitars, bass, keyboard, 2 banjos, amps and mics. When I add up everything I've spent, it was probably 2/3 the cost of 10 years of $100/mo cable. I wasted a decent portion of that cost on a few other instruments I never played and ending up giving away as gifts to friends though.

Re: Online installment loans have taken the subprime market by storm

#220

Post by mrguyorama » Tue, Oct 29, 2019, 6:29 PM UTC

dsfyu404ed wrote: post #163

chasd00 wrote: post #135

Earlier quoted context omitted.

the tradeoff is insanely low interest rates. Without the federal backstop student loans would have the interest rates of credit cards because as soon as new graduates get into the workforce, can't find a job, they'll file for bankruptcy to get out of the loan. Managing that risk without a backstop means incredibly high interest rate to cover for the losses of loans lost in bankruptcy.

Student loans didn't have those kinds of interest rates back when they could be discharged in bankruptcy 20+yr ago. Why would they now?

The downside/risk to the lender is about 10x higher per loan than it was 20+ years ago