Fair juice on a loan?

[Compassion]

To you what is fair juice on a loan, whether you pawn a domain, get the loan from a friend, a bank, a casino, a company, a credit card....


If you want to use collateral/no collateral to make two different figures, understandably - feel free to do so..


What is a fair amount of juice to pay per

month?

year?







I realize the ranges of juice vary from 0% to 25% + the way things are currently done....

But what is a fair %?




Let's use a loan of $10,000 as an example.



Looking forward to your opinions...

 

[mhdoc]

FWIW used car dealers usually pay 5% per month for their floor plan money. Two months max before payoff is required and the lender holds the title.

How many people on this forum know the word "juice" in this context?

 

[Compassion]

FWIW used car dealers usually pay 5% per month for their floor plan money. Two months max before payoff is required and the lender holds the title.

How many people on this forum know the word "juice" in this context?

Well, at least a couple more now....


:cy:


Floor plan money coming from where?

I am not well versed in car dealerships.







If economic stability and homeostasis come to be, there will have to be more financial transparency....


and particularly so in the areas of price discrimination and interest (juice)




The same bottled water company, shape and size..................

you pull a bottled water from your hotel fridge.... $4.50

you walk down the hall and pay a machine for the bottled water....$2.00

you go downstairs and pay the shopkeep for the bottled water... $1.25

you go outside and pay the gas station for the bottled water... $.75

you go to the grocery store and pay the cashier for the bottled water... $.50

you go to costco and pay for the bottled water......$.16 each if you buy hundreds at once..

Alright a specific example here



If paying for a domain name valued at $10,000 over 12 months....

How much interest should be paid over the 12 months due to not having all $10,000 up front and being permitted to pay over 12 months...?

 

[mhdoc]

Small used car lots always have someone with deep pockets providing the funds for the cars they have for sale. Usually it's a private individual(s), Maybe a successful, retired dealer, or individuals looking for super high yields. Super risky. 40 Cars with $4,000 each cost adds up real fast. Of course if you can sell those 40 cars in 30 days the profits add up too.

If you happen to drive by a car lot and one day you notice all the cars are gone it means they lost their floor plan.

On the Buy Here Pay Here (BHPH) lots the sales contract will be written at 32% interest (or more) and sold to a finance company at about 75% of face. The funds from that are supposed to pay off the floor plan, but, as you can imagine, that doesn't always happen.

 

[Spade]

How many people on this forum know the word "juice" in this context?

LoL. I thought the same thing. But we Domainers are a clever bunch.

On a side note - one of my favorite lines (although, not in this context)

"Always know if the juice is worth the squeeze" -- The Girl Next Door

 

[Len]

.

Alright a specific example here



If paying for a domain name valued at $10,000 over 12 months....

How much interest should be paid over the 12 months due to not having all $10,000 up front and being permitted to pay over 12 months...?

IMO for this example I would think that 5% interest would be fair over the 12mths. I would require the payments to be made by a specific date each month with a default clause that 2 late payments would increase the interest to 10% and 2 missed payments would nullify the sale without refund of monies already paid. Full control of the domain would not be handed over until the final payment was made.

 

[Compassion]

IMO for this example I would think that 5% interest would be fair over the 12mths. I would require the payments to be made by a specific date each month with a default clause that 2 late payments would increase the interest to 10% and 2 missed payments would nullify the sale without refund of monies already paid. Full control of the domain would not be handed over until the final payment was made.

so at 5% that would make the total paid in 12 months $10,500



some other creepy factors we have to worry about today are things like inflation - rising at a higher rate than 5% per year....


This is one risk I see in this 12 month domain name loan scenario.

 

[Len]

so at 5% that would make the total paid in 12 months $10,500



some other creepy factors we have to worry about today are things like inflation - rising at a higher rate than 5% per year....


This is one risk I see in this 12 month domain name loan scenario.

I don't think that inflation would come into it over 12mths..... Maybe on a 2-3yr loan.
Over 12mths both parties are taking the risk that the value of the domain doesn't rise or fall to the extent that the seller is giving the domain away or the buyer is paying for a domain that may not be worth anything by the time he /she gets their hands on it.

 

[Compassion]

I don't think that inflation would come into it over 12mths..... Maybe on a 2-3yr loan.
Over 12mths both parties are taking the risk that the value of the domain doesn't rise or fall to the extent that the seller is giving the domain away or the buyer is paying for a domain that may not be worth anything by the time he /she gets their hands on it.

http://www.nysun.com/business/double-digit-inflation-crisis-looms/72500/

http://www.usatoday.com/money/economy/housing/2008-12-12-homeprices_N.htm

http://www.caycompass.com/cgi-bin/CFPnews.cgi?ID=1036008

http://caps.fool.com/blogs/viewpost.aspx?bpid=115358&t=01000420523245711617

http://www.cnsnews.com/public/content/article.aspx?RsrcID=40181


there is a reason a 1964 silver Kennedy half dollar (90% silver) trades at $5 to $7 in circulated condition but when it was made it actually represented 50 cents.

(1965-70 Kennedy halves trade at about $2 to $4 each (40% silver))





The unregulated free for all with the printing presses being conducting by the privately owned fiat paper money producing federal reserve is of great concern for anyone who does anything in american dollars.


bottom line: inflation is a real problem we must be aware of. Remember when a stamp was 25c? or when a loaf of bread was under a $1?


Those days are gone..


But they can return with sound money, what America was founded on... a dollar represented by gold hence giving the honor of the dollar being distinctly known to be "as good as gold"

1913 is when the money supply was hijacked.

August 1971 is when we went to complete fiat currency - that is currency backed by nothing, accepted as gold - when in reality it is just paper.






Because of inflation I lean towards a 10% juice charge on a 12 month domain name loan on a purchase.

 

[Len]

My example of 5% interest would be something I would be prepared to do if I was selling a domain with the criteria I outlined.

On the other hand, if I was loaning $10,000 cash to someone to buy domains or whatever, then I agree, my APR would be a min of 10%

 

[mhdoc]

You would not believe the number of events that can change a borrower from a good to bad risk; health issues, divorce, legal problems; the list is endless. IMHO 10% is not nearly enough to adequately compensate for your risk.

 

[Compassion]

You would not believe the number of events that can change a borrower from a good to bad risk; health issues, divorce, legal problems; the list is endless. IMHO 10% is not nearly enough to adequately compensate for your risk.

yes,

there are so many variables


those trained in actuarial studies could explain all these variables..........


ethically there has to be a better way than our current situation

My example of 5% interest would be something I would be prepared to do if I was selling a domain with the criteria I outlined.

On the other hand, if I was loaning $10,000 cash to someone to buy domains or whatever, then I agree, my APR would be a min of 10%

These are volatile times...whose to say your french franc may not become a euro or your icelandic krona crash or your american dollar become the a....


10% seems absolute bottom with so many variables & factors and the fact 2008 was the most volatile horrific year financially since the 1930s.

 

[notlikeyou]

first thought was 5%, being it's for domains I'd say 10% would be acceptable. But you'd be damn certain there would be a big consequence for missing a payment. i.e. 5% increase on the juice or return of partial funds to the "bank"

"you are only as good as your last envelope"

 

[-REECE-]

With how much domains have devalued over the past few months, I'd want at least 30% along with terms similar to Len's. LLL.coms have fallen a full 50% since Summer, most domains haven't done much better, many have done worse still. And then there's inflation on top of that...

 

[Compassion]

With how much domains have devalued over the past few months, I'd want at least 30% along with terms similar to Len's. LLL.coms have fallen a full 50% since Summer, most domains haven't done much better, many have done worse still. And then there's inflation on top of that...

true, but if prices go down more is then it advantageous to lock an agreement now than later?

for a less volatile name like a premium one word com or top level geographical generic - 30% seems high....to make someone pay $13k for a name over 12 months for a name you'd sell instantly to them for $10k...


Maybe 30% is fair...

Maybe it is.

 

[-REECE-]

The way I see it is if I was asking 10 or 15%, why wouldn't someone just put it on a credit card? Probably coming to me because nobody wants to give them another credit card and all their current cards are maxed. Same goes for why they wouldn't get a bank loan / line of credit -- because they can't.

As a bonus, by charging such a high interest rate, people would likely only come to you if the domain was worth a fair bit above 13k, lowering the risk of lending them money.

All hypothetical of course, I wouldn't lend money at all except to people I completely trust in the current market. All someone has to do is lose their job and struggle to put food on their family's table... Then stuff like paying for domain loans really start to not matter much anymore.

true, but if prices go down more is that it advantageous to lock an agreement now than later?

for a less volatile name like a premium one word com or top level geographical generic - 30% seems high....to make someone pay $13k for a name over 12 months for a name you'd sell instantly to them for $10k...


Maybe 30% is fair...

Maybe it is.

 

[Compassion]

The way I see it is if I was asking 10 or 15%, why wouldn't someone just put it on a credit card? Probably coming to me because nobody wants to give them another credit card and all their current cards are maxed. Same goes for why they wouldn't get a bank loan / line of credit -- because they can't.

As a bonus, by charging such a high interest rate, people would likely only come to you if the domain was worth a fair bit above 13k, lowering the risk of lending them money.

very good points...

also the buyer may have a streamlined dev plan to create substantial revenue during the 12 months...creating way way more than enough to pay the 30% juice..

 

[-REECE-]

Exactly. If the buyer knows they can likely make a huge profit either through dev or resell, they'll come to you just the same if they don't have a better option.

very good points...

also the buyer may have a streamlined dev plan to create substantial revenue during the 12 months...creating way way more than enough to pay the 30% juice..

 

[Aggro]

Time to bring some reality to this discussion.

Pawn shops typically charge 5-7% PER MONTH, compounded - giving approx 70% to 120% APR.
Standard loan term of 6 mths max. Loan can be paid-off at any point, and only pay the interest accrued.
And that's for the usual pawn shop (relatively) easily sellable items eg jewelry, watches, cars etc

Plus people pawning stuff ain't exactly the cream of credit risk in the 1st place. It's a last resort aka last chance saloon.

Domains should be even higher than that for obvious reasons.
For domains - risky/non-standard/higly illiquid stuff - any lender charging 5% ANNUALLY (or even 10% pa) is a bad businessman or a fool.
I mean, seriously, one can get 4% pa on a CD with near zero risk (save the inflation talk cos inflation aint happening in next 12 mths)

For the $500 "juice", lender might as well go out and wash cars or mow lawns - far better risk/reward and at least they can sleep easy at night..

:kickass:

 

[-REECE-]

I agree that 5 or 10% are certainly too low, however I doubt you could get much more than 30% out of people when alternatives do exist (eg. Digipawn).

Obviously the risk involved will depend on the domains you're taking as collateral -- I wouldn't feel very comfortable giving someone a 10k loan on a 10k LLL.com, however I would feel pretty comfortable giving them that same loan on a nice double premium LL.com, generic, or big city geo domain.

Time to bring some reality to this discussion.

Pawn shops typically charge 5-7% PER MONTH, compounded - giving approx 70% to 120% APR.
Standard loan term of 6 mths max. Loan can be paid-off at any point, and only pay the interest accrued.
And that's for the usual pawn shop (relatively) easily sellable items eg jewelry, watches, cars etc

Plus people pawning stuff ain't exactly the cream of credit risk in the 1st place. It's a last resort aka last chance saloon.

Domains should be even higher than that for obvious reasons.
For domains - risky/non-standard/higly illiquid stuff - any lender charging 5% ANNUALLY (or even 10% pa) is a bad businessman or a fool.
I mean, seriously, one can get 4% pa on a CD with near zero risk (save the inflation talk cos inflation aint happening in next 12 mths)

For the $500 "juice", lender might as well go out and wash cars or mow lawns - far better risk/reward and at least they can sleep easy at night..

:kickass: