Author Topic: Negative Interest Rate home and auto loans  (Read 1193 times)

Offline xwired

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Negative Interest Rate home and auto loans
« on: June 29, 2016, 03:24:17 PM »
So these are not a reality and coming soon. This is a way to invoke Inflation and thus increase GDP into the market without actually doing so.

Here's how they are gonna work:

You agree to buy a car for $10,000 on a -5% negative rate loan. The payback amount is $9500. HOW you ask? The dealer has agreed to a lesser price of 9500 but is showing the sale of $10k. The bank is offering a loan based on these facts showing a negative rate.

The dealer gets his 9500. The buyer gets his car thinking he got a better deal, the bank gets to write down $500 on their taxes and the US Government gets to chalk up an extra $500 towards GDP showing it increasing. There are more aspects to it than this but you get the picture.

Just finished up an algorithm set for a car loan software company on this with SEVERAL base facts.

Homes will be no different. NINJA and NO DOWN loans will be back and we will be back in the 2003-2006 swing times again! I kid you not!



Offline infinitum

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Re: Negative Interest Rate home and auto loans
« Reply #1 on: June 29, 2016, 10:10:41 PM »
I’m tempted to give you a chance to rethink this before I comment xwired, but since I have no experience with negative interest rates, I could be totally wrong.

First, the example of the car loan. Regardless of interest rate, the sale price will be $10,000. The payback amount is $10,000 (normally plus interest), in this case minus interest. With monthly payments the interest saved the first year will be less than $500. Normally a car loan goes 3 to 5 years, sometimes more. In that case the savings would be substantially more. The longer the loan, the more you would save.

2nd, in this case, the bank would not be writing off $500. They have to make a profit before they can write down anything. In this case they lose 5% of the balance every year. That would not give them a write-off, it just lowers their profits, if any.

3rd, the dealer gets his full $10,000 when the contract is signed and delivered to the bank.

4th, which brings us to the major point of all this. The bank won’t be giving out negative car loans, home loans, or any other loans. Us poor slobs are the ones that always take the loss, not the bank. Negative interest will apply to our bank deposits, the poor slobs that are dumb enough to buy negative interest rate bonds or any other way the bank can finagle us into giving them our money at negative interest. The bank won't be loaning us money at negative interest....ever.

Again, I have no clue what I’m talking about but I’m sticking with it till somebody shows me it’s wrong.




Offline xwired

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Re: Negative Interest Rate home and auto loans
« Reply #2 on: June 30, 2016, 04:37:29 PM »
A positive rate would ADD to the total price paid. A negative rate takes away from the price paid.

I'm sure this is going to soften the aspect of negative rates on US Bonds.

The math on a loan is done as a deal. Just like a positive loan. You'll get a lower interest rate (positive) on a 15yr mortgage than a 30. So on a 4 year car loan the negative rate is LESS than an 84 month loan.

I had to severely twist my reality to come up with this. It was submitted and accepted along with a dozen others. Us Coders Prevail!!

Most people do know we use SIC codes and average turnover rates OVER average salary rates to determine whether a 3 yr or 6 yr loan is acceptable. It had to be calculated with these but we were permitted as much as 1.5% adjustment to averages. HOLY COW!

The cost is the same, just the math showing how we came up with it has changed. The $10k car would have sold for $9500 but now will be sold for $11k with a negative rate that shows the final payout of $9500. But paying it off early means paying more.

It seriously warped my mind. I still can't see straight having to run the alg forward and backwards in a forward fashion.

Offline xwired

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Re: Negative Interest Rate home and auto loans
« Reply #3 on: June 30, 2016, 04:53:50 PM »
Keep in mind this is just an accounting trick to sell more and get qualifications met. Still if put into play this would make negative rate seem like a good thing.

Can you imagine the number of people slamming into car dealers to get a negative rate car loan on a new ride? Or a house? The sale numbers would be up double digits. People are dumb and will never realize it until later. Like Car Leases.