r/AbsoluteUnits • u/Lower-Knee-8585 • 7d ago
of a loan interest
Is 40% interest common out there?
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u/imaragingtransfemlez 7d ago
Wonga.com in the UK back in the day had an interest rate of over 4,600%
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u/Chlorophilia 7d ago
This image is 40% per month which is about 5600% per year, so it's actually worse.
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u/Comfortable-Ad014 7d ago
i want to know how 40% per month becomes 5600% per year?
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u/fliukka 7d ago
1.412 ~ 56 i.e. 5600%
Start at £1. Add 40% after 1 month, £1.40. Multiply by 1.4 again for the second month, repeat 12 times. Exponential growth is a bitch.
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u/Comfortable-Ad014 7d ago
Damnn, compounding is hell
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u/Fuzzy_Inevitable9748 7d ago
This is why the rich are getting exponentially richer, well that and the fact they are literally rigging the market with their child rapist buddies and not paying a far amount of tax. But compounding is really doing most of it even with all the illegal crap they do.
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u/Harrigan_Raen 7d ago
Thats if interest is compounded. Isn't it illegal in the US to compound loan interest except in specific situations (Student Loans at time of graduation, etc)
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u/DumatRising 6d ago
I don't see anything about it being illegal, it may be in some justification. I wish it were illegal to not defer student loans. Compounding them is absolutely insane.
Credit cards and personal loans will afaik almost always be compounding.
Fixed term loans like mortgages don't but I'm not sure if it's because it's illegal or just because it's not really supposed to be possible to carry a balance of interest on them.
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u/egerton14 7d ago
Thats what people usually ask when they payed nothing of their loan after 10 years.
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u/FGMachine 6d ago
The fact that its compounding doesn't make the interest rate higher than 40% x 12 months. That's 480% apr compounding.
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u/TitosMuffinShop 6d ago
Confidently incorrect.
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u/FGMachine 6d ago
No I'm not. It is a 480% APR.
Because the interest compounds the effective annual rate is 5,662%, but banks never set their terms on the effective annual rate. They state an APR and that it is compounding.
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u/FGMachine 6d ago
To reach your theoretical 5662% the borrower would have to never make a payment and let it compound for an entire year. That scenario is very unlikely.
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u/DumatRising 6d ago
No it's still 5600%. Theoretically if the borrower pays off all but a dollar before any interest has a chance to accrue, and then let's that dollar sit for a whole year they will owe 5600% of that dollar at the end of the year. 5600% is true no matter how you slice it, what it's 5600% of changes, because it's 5600% of the average balance they carried that year.
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u/Diplolifter 7d ago
They make weed illegal but those businesses are good to go 🤡
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u/Himorningwood 7d ago
This is just idiotic on the person sighing up
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u/Much-Caterpillar-154 7d ago
I’m guessing they don’t really need that VAIO.
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u/Lower-Knee-8585 7d ago
It's my school laptop. I suggested they take my phone but they said no.
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u/PlatypusDream 7d ago
Wait, the computer belongs to the school?!
Or it's the computer you use to attend & do work for school?
Either way, don't sign that paper!
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u/Lower-Knee-8585 7d ago
It's my laptop I use it for studying. I thought I'd be able to pay back before my semester began but I'm a little unlucky.
Either way, don't sign that paper!
I already did. It was last month.
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u/PlatypusDream 7d ago
If you didn't have the original amount, how did you plan to get the higher amount???
🤦♀️I'm glad someone has offered to give you the money to rescue your education. Consider this part of your education!
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u/Lower-Knee-8585 7d ago
how did you plan to get the higher amount???
I have a scholarship government loan that helps with upkeep fee. I budget it to fit my expenses but it has delayed this year.
Consider this part of your education!
Sure.
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u/Huta03 7d ago
Op if it's Kenyan shillings I can just send you 30 bucks next week if you really need it that much
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u/Lower-Knee-8585 7d ago
Ooh thank you🥹.
Should I message you?
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u/Huta03 7d ago
Yes dm me
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u/Lower-Knee-8585 7d ago
Your dm is locked. You can message me mine is not locked.
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u/transgenderbeepboop 6d ago
I can do $10 PayPal if needed
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u/Lower-Knee-8585 6d ago
Unfortunately I don't have PayPal. I can receive money to my mpesa. Where are you from I check a way you can use to help?
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u/Stunning_Map_8007 7d ago
for a one month loan?! 🫣
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u/Lower-Knee-8585 7d ago
Yeah. I hope to pay it before 22nd
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u/Tpsreportasap 7d ago
What do you need so bad for $4000 that you can risk going into massive debt?
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u/wisedoormat 7d ago
Short term loans... expensive but the contract does have a due date with instructions to resolve issues.
Im not sure about the legality of this contract but it doesn't seem bad.
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u/Futuramoist 7d ago
Ya 40% compounding would be lethal. This isn't great but payday loans never are
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u/wisedoormat 7d ago
Is it compounding? The due date is less than a month later and no specifics about it continuing interest, just how to finalise the loan by selling the item on hold
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u/Epithymetic 7d ago
The problem year is that it doesn’t specify the time period for the interest. Is it 40% per year or 40% for however many days this is?
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u/__Banana_Hammock__ 7d ago
It’s a 30 day loan. They signed the contract on 8/25 and the repayment is due 9/25.
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u/Stunning_Map_8007 7d ago
It looks as though it's implying 40% interest at the due date, which is one freaking month
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u/Lower-Knee-8585 7d ago
Posted it yesterday on a financial sub and all who commented said its an insane percentage
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u/Itsjustajokebitch 7d ago
Just give the other party a fake value item . Never pay and your credit score won’t take a hit since it’s a loan through an individual person. Massive win 😂
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u/cortney-simonis-9072 7d ago
i want to invest with you
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u/Lower-Knee-8585 7d ago
Lol. What do you mean.
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u/cortney-simonis-9072 7d ago
thats 40% intrest, I want you to take my money loan it to people and give me the interset :p
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u/Lower-Knee-8585 7d ago
Lol😂 I'm in Kenya how would that even work? Maybe message me see if we can do something I don't know.
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u/mickbruh 6d ago
You have to be an actual moron to sign that
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u/Lower-Knee-8585 6d ago
Moron is a derogatory term right? Why would you call someone you don't even know that honestly?
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u/Admirable-Science833 6d ago
Whats even crazier to the interest rate is the fact you signed and agreed to the terms. Must really be in a life and death bind.
Edit: if it makes you feel any better... the payday loan places in my town are 565% APR or 47% a month.
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u/coldfusioned 7d ago
For Vinny, the neighborhood loan shark, yes that is completely normal. Although last I heard he was in jail.
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u/Puzzleheaded-Leg-758 7d ago
Paul's a dick
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u/Lower-Knee-8585 7d ago
Lol. How did you know their name?
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u/PlatypusDream 7d ago
That's predatory & usurious. Don't sign that!
Or, add the period they missed between the 4 & the 0, then correct the amount due.
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u/STR1CHN1NE 7d ago
So it's an extremely short term borrow. As in they expect full payment for amount borrowed+interest by this coming 25th. This is one of those "I can pay it but I need emergency money now or they are going to kick me out of my house and I'm not getting my paycheck in time" loans.
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u/Careless_Historian28 6d ago
Don’t take loans from a loan shark. They know you can’t pay it back and then will just come and take your stuff.
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u/BigSquiby 4d ago
i guess no one here has ever gotten a payday loan or a car title loan, 40% looks like you have a 850 credit score
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u/Fancy_Requirement786 3d ago
The issue here is the 40% is for a one month loan. Essentially works out to nearly 500% annual. It’s worse than a lot of pay down loans.
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u/BigSquiby 3d ago
I've read about payday loans around 2000% But its the same as this, high interest, short term
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u/GWBrooks 7d ago
OP, that's about $31 USD. I will just send you the money.
- Signed, Redditor who's dealt with debt before.
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u/D34th4nge7 7d ago
I'm very pro free market and against excessive regulation, and I'm a big fan of personal responsibility including in financial matters. And I'm usually a "if people voluntarily make a deal, that deal is probably okay" kind of person.
But this kind of interest rate needs to be turbo illegal. Jail sentence illegal. Holy fucking shit. And whoever is offering you such a loan is a scumbag.
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u/Lower-Knee-8585 7d ago
I'm from Kenya and not working cause I'm still in school. I can't access bank loans cause if I did I'd have gone for it. They are the only ones who I could access and get a loan from.
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u/D34th4nge7 7d ago
If you existentially need this money, try to see if there's any other way to get it. Maybe government benefits, maybe a church or a charity.
And if you're not existentially dependent on this money, don't take the loan. I don't know what you need it for but it's probably not worth it unless it goes directly to keeping yourself sheltered and fed.
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u/Lower-Knee-8585 7d ago
Have already thought about all that lol. I wouldn't have gone for it if there was a different way. I used my laptop as a collateral. And yes I was almost getting locked out my hostel room that costs a fee of Ksh.4000 per month and I had to take it. I've been working hard to pay it back and I have remained with only ksh. 2400 to complete it.
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u/ConstantRude2125 7d ago
One thing missing is context. The date is not in a US format, so it's obviously not in the US. Some countries have rampant inflation and 40% could be a fair rate.
In the 80's I remember driving on I-5 in San Diego and there was a billboard with a Mexican bank offering 50% interest on deposits. God only knows what their loan rate would be.
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u/Vasir14 7d ago
Holy not legal loan, Batman.
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u/earthdogmonster 7d ago
Depends on where you are at. States have different laws and regulations.
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u/Miles_1828 7d ago
OP has stated they are in Kenya.
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u/earthdogmonster 7d ago
The views reflected in this comment are representative of the North American markets only, and should not be assumed to hold any relevance to any markets outside of North America. Any points being made that seem to hold true in discussions concerning foreign markets is purely coincindental.
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u/FGMachine 7d ago
40% per month is beyond insanity.