Quit Ckaim Deeds (Loan Sharking?)

[Dennis Heaton]

During my ongoing "amateur" investigation into certain activities in and around Oklahoma City, I came across some information on a local website that seemed a bit "puzzling."

"Store Owner" is in need of $100,000. "Lender" agrees to loan Store Owner $100,000, to be paid back at $2,667.66/month (includes $1000.00 interest per month), over a period of 60 months. Total payments: $160,059.60.

Isn't 60% "interest" a bit excessive?

[gjl]

That loan is only 20.33% interest rate. If you want to experience a high interest rate loan step up to a Payday Loan counter.

[catch22]

Have you seen the Western Sky loan commercials? Fine print reads 866.7% interest (or somewhere around that). Since they are incorporated as and on an Indian (Native) Reservation, loan shark laws don't apply.

[Paseofreak]

The interest APR works out to be about 20.28%. Remember, it's paid over five years. Still pretty high given current commercial rates.

[Pete]

Actually, the compounded annual interest rate on that loan would be 20%, but that's still very high.

[catch22]

Have you seen the Western Sky loan commercials? Fine print reads 866.7% interest (or somewhere around that). Since they are incorporated as and on an Indian (Native) Reservation, loan shark laws don't apply.

Actually just looked and it's average around 155%. Still not a percentage that works in your favor at all. The 866 I was thinking of May have been related to something else.

[gjl]

Actually, the compounded annual interest rate on that loan would be 20%, but that's still very high.

Not too high if it is an unsecured loan.

[kevinpate]

Well, first off, if the lender did it that way, the lender has a lot of trust in the Store Owner, spreading out the interest in equal installments throughout the life of the loan. That is not typical. Most loans are very interest heavy on the front end and as the loan period progresses, the principal each month grows and the interest level drops each month.

Second, total interest paid over the life of the loan works out to a 20.5sumthin' annual interest rate. More than I would want to pay, but if the owner is a highc redit risk it may be the best option he or she had going.

Here is one of many, many loan calculators online if you want to explore a bit.
Loan Calculator

[kevinpate]

Have you seen the Western Sky loan commercials? Fine print reads 866.7% interest (or somewhere around that). Since they are incorporated as and on an Indian (Native) Reservation, loan shark laws don't apply.

Just an FYI, I believe the person behind WS got slammed and went out of business.

[Dennis Heaton]

I have always been terrible at simple arithmetic. I originally came up with a 20-25% range. I was looking at the 60k profit on a 100k loan.

catch22...yep, I have seen those commercials. Folks are responsible for knowing what they are signing before they put their X on the dotted line. Still, that is outlandish.

[gjl]

I'm going to guess the OP is looking at the total paid back less the loan amount divided by the number of months and coming up with the $1000/mo figure even though loans aren't amortized that way.

[gjl]

I have always been terrible at simple arithmetic. I originally came up with a 20-25% range. I was looking at the 60k profit on a 100k loan.

catch22...yep, I have seen those commercials. Folks are responsible for knowing what they are signing before they put their X on the dotted line. Still, that is outlandish.

Not really outlandish if it is an unsecured loan. That is less than a lot of people are paying on credit card debt. Lenders take a lot of risk on unsecured loans.

[Dennis Heaton]

I'm going to guess the OP is looking at the total paid back less the loan amount divided by the number of months and coming up with the $1000/mo figure even though loans aren't amortized that way.

Exactly! Thanks!