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

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

#241

Post by wefarrell » Tue, Oct 29, 2019, 7:44 PM UTC

driverdan wrote: post #229

wefarrell wrote: post #195

Earlier quoted context omitted.

It's substantially less risky than having a mortgage on a home.

I downvoted you because this is not true. 0% offers end with the interest rate spiking. Mortgages have extremely low rates right now. All you'd have to do is carry that 0% offer past its expiration for a short time to make up the cost difference.

It's absolutely less risky for a number of reasons:

1. If I default on my credit card debt it will screw up my credit but the banks can't come after any of my assets. If you default on a mortgage it will screw up your credit and the bank will take your home.

2. I am free to take on the level of risk that I'm comfortable with, including risk free options such as treasuries or CDs. With a mortgage you are locked in.

3. I am free to mitigate my risk by diversifying across asset classes. I can put some money in gold, some in real estate, some in Japanese equities, etc...

With a mortgage you are leveraging a huge chunk of money and concentrating it in a single undiversified holding. If a disaster strikes and the insurance company doesn't cover it your wealth is wiped out. If property values decline and you need to move you're wiped out.

By every measure owning a home is riskier.

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

#242

Post by SkyBelow » Tue, Oct 29, 2019, 7:45 PM UTC

ThrustVectoring wrote: post #193

logicchains wrote: post #171

Earlier quoted context omitted.

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…

The marshmallow experiment is less about whether children are able to delay gratification, and more about whether or not they trust adults to deliver on the promises they make.

While I wouldn't want to attribute either cause as being more or less, it is a n interesting confounding variable that I wonder who the original and subsequent research accounted for it. Especially since it also applies elsewhere in life. For example, investing money is delaying gratification, but it is also a question if you think you will actually make money which is not guaranteed.

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

#243

Post by Ididntdothis » Tue, Oct 29, 2019, 7:48 PM UTC

bryanlarsen wrote: post #71

mumblemumble wrote: post #56

Earlier quoted context omitted.

I don't want to tut-tut the poor, but I do want to tut-tut consumer culture in general. There are a whole lot of people who _should_ be able to afford an unexpected car repair bill, and could quite easily do so, if they weren't spending $100 a month on cable TV, $800 every other year on a high-end smartphone, $500/month on owning an SUV when a $200/mo economy car would serve just fine, etc., and put the money into a…

> $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...

It’s still 100 dollars you don’t have for car repair.

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

#244

Post by Ididntdothis » Tue, Oct 29, 2019, 7:50 PM UTC

downrightmike wrote: post #117

gruez wrote: post #89

Earlier quoted context omitted.

Just because it's cheap doesn't mean there aren't cheaper alternatives. Most people could easily replace that with a netflix subscription for $13, since they already have an internet connection.

Yeah, but then the cable companies will charge you anything over 1TB. And if you have more than 2 screens, because of kids, it will add up, so the cable company will relax that cap IF you also buy cable TV. Remember cable companies are assholes.

Blowing through 1 terabyte in a month sounds pretty difficult. You have to do lot of steaming to use that much.

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

#245

Post by colechristensen » Tue, Oct 29, 2019, 7:56 PM UTC

blhack wrote: post #35

Okay these loans certainly sound like a bad deal, but what are people supposed to do? Say your car breaks and you can’t get to work. For all of us here billing out >$100hr or whatever your local consulting rate is, the answer is some calculus around the cost of losing your job vs the cost of fixing it. But for MOST people, the cost of fixing it is functionally infinite. They literally do not have even a few hundred d…

80% of people live "paycheck to paycheck" whatever exactly that means. (count me among them)

Very few of them actually need to. It is possible at any income level to spend less money than you make. People don't tend to make those choices though and unfortunately prices reflect this - for a lot of things, especially housing, prices rise to whatever people will pay – if everyone is willing to pay so much for housing that they can't save much at all, well the price of housing raises so everybody does that.

You can choose to not live paycheck to paycheck but it means making different choices about where you live, how you entertain yourself, and how you acquire things. This is applicable at the highest and lowest income levels.

People should be thinking that in order to afford a car they likewise need to be able to afford its repairs, but instead of buying a cheaper car and saving some for eventual repairs or maintenance, people just consider the acquisition cost and buy their max.

I am among these people despite a tech job in the bay area I live mostly paycheck to paycheck as a result of several choices I've made, and I don't necessarily regret all of them but at the same time the situation definitely frustrates me.

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

#246

Post by merpnderp » Tue, Oct 29, 2019, 7:57 PM UTC

blhack wrote: post #35

Okay these loans certainly sound like a bad deal, but what are people supposed to do? Say your car breaks and you can’t get to work. For all of us here billing out >$100hr or whatever your local consulting rate is, the answer is some calculus around the cost of losing your job vs the cost of fixing it. But for MOST people, the cost of fixing it is functionally infinite. They literally do not have even a few hundred d…

No, we need to figure out ways to help people make better decisions, and giving poor people money doesn't seem to help. It's like the old saying that there's a difference between being broke and poor - broke is liquidity problem, poor is a state of mind.

"Our results also do not support the hypothesis that financial strain by itself wors- ens the quality of decision-making. Even though there are substantial differences in financial resources before and after payday for our samples of poor US households, we find no evidence that the quality of their decision-making, or being prone to heuristic judgments differs across the before-payday and after-payday groups."

https://www.aeaweb.org/articles?id=10.1257/aer.20140481

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

#247

Post by hanniabu » Tue, Oct 29, 2019, 7:58 PM UTC

blhack wrote: post #104

philipov wrote: post #78

Earlier quoted context omitted.

It's actionable by passing laws that limit the upside executives can extract from capital investments and raise minimum wage on large business. There will always be unexpected expenses, so you have to pay people enough to be able to save. Much better than making people dependent on those who control the mechanisms for allegedly limiting unexpected expenses; that's just a plan for increasing social control available t…

People have been trying that for 100 years or so. So far it hasn’t worked.

Politicians have only been trying the bare minimum needed so they can continue enjoying benefits provided by lobbyists and keep the pesky annoying people (population) off their backs. It's hard to enjoy a life of luxury when you have people asking you to do your job and represent them.

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

#248

Post by basch » Tue, Oct 29, 2019, 7:59 PM UTC

p1mrx wrote: post #211

basch wrote: post #72

Earlier quoted context omitted.

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.

A balance transfer is a one time fee, not compounded monthly or daily. You pay 3% up front, and then theres no benefit to paying the loan off early, except for holding a lower credit card balance.

What I am saying is, is that IF you are taking a balance transfer, to accurately compare it to a traditional, monthly compounded loan, you need to account for the minimum payment differences (the balance transfer will be 5x-10x lower) and then calculate the interest that extra cash not paid back to the loan can net you.

I am making a counter argument to the claim that a 3% balance transfer is equal to a 5.5% apr loan, i think its closer to 4.5% if managed wisely. Its closer to 50% higher, not double.

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

#249

Post by asdfman123 » Tue, Oct 29, 2019, 8:03 PM UTC

colechristensen wrote: post #245

blhack wrote: post #35

Okay these loans certainly sound like a bad deal, but what are people supposed to do? Say your car breaks and you can’t get to work. For all of us here billing out >$100hr or whatever your local consulting rate is, the answer is some calculus around the cost of losing your job vs the cost of fixing it. But for MOST people, the cost of fixing it is functionally infinite. They literally do not have even a few hundred d…

80% of people live "paycheck to paycheck" whatever exactly that means. (count me among them) Very few of them actually need to. It is possible at any income level to spend less money than you make. People don't tend to make those choices though and unfortunately prices reflect this - for a lot of things, especially housing, prices rise to whatever people will pay – if everyone is willing to pay so much for housing th…

Thank you, people don't acknowledge that simple point of logic often enough -- debt is a mindset.

Really what we need is a culture of saving, but a part of me feels that many people in our culture find that extremely difficult because billions of dollars are spend every year on propaganda designed to try to get us to spend more (read: advertising).

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

#250

Post by MuffinFlavored » Tue, Oct 29, 2019, 8:09 PM UTC

wefarrell wrote: post #148

MuffinFlavored wrote: post #97

Earlier quoted context omitted.

Could you elaborate on this? If I started a business (LLC), I could open an AmEx card card under the business and have access to a 0% line of credit? That doesn't sound quite right. I'm surely missing something.

The card is still under your name, the application will pull your credit report, and you're personally liable for the debt. However most major banks (with some exceptions) do not report business cards to the credit bureaus unless you're in default, so it's possible to carry large balances without any impact to your credit.

When is the statement balance due? Every 30 days? I don't see how this is 0% APR/any different than a consumer credit card?