this post was submitted on 04 Apr 2024
137 points (96.6% liked)
Asklemmy
43761 readers
1141 users here now
A loosely moderated place to ask open-ended questions
If your post meets the following criteria, it's welcome here!
- Open-ended question
- Not offensive: at this point, we do not have the bandwidth to moderate overtly political discussions. Assume best intent and be excellent to each other.
- Not regarding using or support for Lemmy: context, see the list of support communities and tools for finding communities below
- Not ad nauseam inducing: please make sure it is a question that would be new to most members
- An actual topic of discussion
Looking for support?
Looking for a community?
- Lemmyverse: community search
- sub.rehab: maps old subreddits to fediverse options, marks official as such
- !lemmy411@lemmy.ca: a community for finding communities
~Icon~ ~by~ ~@Double_A@discuss.tchncs.de~
founded 5 years ago
MODERATORS
you are viewing a single comment's thread
view the rest of the comments
view the rest of the comments
Compound interest.
Let’s say you need to borrow 5000 € for your first car, but you have only 700 €. First, you’ll need to find a lender who is willing to share the risk with you. Then, you form a joint stock company (Tom’s Volvo C30 2008 incorporated), where you own 7/50 of the car and the other party owns the rest. When you have some more money, you can buy some more stocks. One day, you’ll own the whole car and the lender has all of their money back.
So...instead of loans, you're advocating that people form corporations where shares are bought over time instead?
You'll still have to pay some interest to motivate the other party to invest, all you've really done is generate a bunch of extra paperwork to spin up a corporation.
The idea is to avoid the expense spiraling out of control due to exponential growth.
In order to motivate your business partner, you should have a contract that defines the price of the stocks in a favorable way. It’s like buying and selling really. The lender pays 4300 € for the car, and sells it at a higher price, such as 4600 €.
Oh, if you're trying to prevent usury, it would be far simpler to either cap interest rates or ban compound interest in favor of simple interest.
Rate caps are the simplest solution least likely to backfire, but unfortunately they tend to push people away from legitimate sources of lending, so you do have to be careful that they aren't too low.
Like I said, forming a corporation isn't a simple thing, doing it to organize a personal loan would take up an enormous amount of time and money, and result in substantially fewer consumer protections.
Well, now that taking a loan is fast and easy, people tend to spend the money they don’t have and buy the things they can’t afford. Having some sort of a speed bump along the way should make people think a little more and avoid getting into unnecessary debt.
I agree, but forming a corp is time consuming in an expensive way, you need (usually) retain lawyers and an accounting firm.
I think it would be better if getting credit were subject to income and asset verification, and most importantly that the government make sure eligibility verification is not abusive, discriminatory, or inconsistent in nature.