Interest free loans! What next

**Robbo** · 30th April 2015, 09:07

I see we have a certain religion that does'nt want loans to have interest as it is against their laws and beliefs.
Perhaps we could lobby our bans for interest free loans for KB members using the same logic.

http://www.stuff.co.nz/business/mone...ree-home-loans

**Scuba_Steve** · 30th April 2015, 09:47

Yea, not quite as "clear cut" (or interest free) as the propaganda machine would have you believe...

This guys says it better than I

They're not "interest-free", they simply have a different way of calculating a return on a loan. The bank and the customer end up forming a partnership and invest in the asset together, with the homeowner eventually buying the bank out at an agreed-upon premium.

Really it's interest in everything but name, although when one of these arrangements defaults it's a little different from a standard loan.

**ellipsis** · 30th April 2015, 10:39

...this thread will probably not accrue that much interest...

**oldrider** · 30th April 2015, 10:47

Interest free loans are not something new - just to this generation who have been brainwashed accordingly!

**Erelyes** · 30th April 2015, 11:09

So just charge a x% p.a. 'Sharia Administration Fee'?

I must go to Iraq and tell them that my religion demands nudie mags be available in stores, and see how I get along.

**Robbo** · 30th April 2015, 11:14

I'd like to see the banks pull the interest rates on mortgages back to 2 or 3% . Surely they would still make enough profit on volume of transactions and it would give the younger ones a better chance to get into their own homes.
Back in my day, which was during the Muldoon era, the interest rates were close to 20% until Piggy pulled them back and froze them at around 10%. Banks were creaming it back then although the the wages in proportion to the cost of a house were much better than they are now.

**Gadget1** · 30th April 2015, 11:28

Originally Posted by ellipsis

...this thread will probably not accrue that much interest...

Are you banking on that happening?

**Oscar** · 30th April 2015, 11:36

Originally Posted by Robbo

I'd like to see the banks pull the interest rates on mortgages back to 2 or 3% . Surely they would still make enough profit on volume of transactions and it would give the younger ones a better chance to get into their own homes.
Back in my day, which was during the Muldoon era, the interest rates were close to 20% until Piggy pulled them back and froze them at around 10%. Banks were creaming it back then although the the wages in proportion to the cost of a house were much better than they are now.

Er...you need to understand that there is someone else at the other end of that equation - like a pensioner trying to live off a nest egg.
During the Muldoon era savers often lost the value of their money as the net interest rate (after tax), was less than the rate of inflation.

**Oscar** · 30th April 2015, 11:37

Originally Posted by oldrider

Interest free loans are not something new - just to this generation who have been brainwashed accordingly!

And what interest free loans would these be then?

**Banditbandit** · 30th April 2015, 11:58

Originally Posted by Gadget1

Are you banking on that happening?

Or maybe giving too much credit?

I'd cheque that out ...

**Robbo** · 30th April 2015, 12:23

Originally Posted by Oscar

Er...you need to understand that there is someone else at the other end of that equation - like a pensioner trying to live off a nest egg.
During the Muldoon era savers often lost the value of their money as the net interest rate (after tax), was less than the rate of inflation.

Oscar, There are other options out there for pensioners to invest their nest eggs in that show a better return than just leaving it sitting in a dead bank account and expecting to get rich on the interest. It is this expectation that causes the banks to have higher lending rates to cover these costs and still show a profit, which they are entitled to do, but not to make a killing.
As for the Muldoon era, you can't lose the value of your money, all you could do was to make less interest than you hoped you would.
It's getting harder for young couples to be able to afford to get into their homes these days than what it was back then. This means that many will be lifetime renters and have no financial security when they retire. If low cost bank loans can be made easily available to them then it's an investment in their retirement and less cost to the taxpayer in rent assist payments.
Banks should be seen only as a safe place to put your money into with a nominal % of interest so that lending can go out at an affordable rate.

**Gadget1** · 30th April 2015, 12:24

Originally Posted by Banditbandit

Or maybe giving too much credit?

I'd cheque that out ...

Thanks, I've taken note of that.

**Oscar** · 30th April 2015, 12:47

Originally Posted by Robbo

Oscar, There are other options out there for pensioners to invest their nest eggs in that show a better return than just leaving it sitting in a dead bank account and expecting to get rich on the interest. It is this expectation that causes the banks to have higher lending rates to cover these costs and still show a profit, which they are entitled to do, but not to make a killing.
As for the Muldoon era, you can't lose the value of your money, all you could do was to make less interest than you hoped you would.
It's getting harder for young couples to be able to afford to get into their homes these days than what it was back then. This means that many will be lifetime renters and have no financial security when they retire. If low cost bank loans can be made easily available to them then it's an investment in their retirement and less cost to the taxpayer in rent assist payments.
Banks should be seen only as a safe place to put your money into with a nominal % of interest so that lending can go out at an affordable rate.

Gee I'm glad you thought things through then.
Aside from a spectacular misunderstanding of how banks work, you seem to be confused on the value of money.
In 1985, the annual inflation rate was 17.9%, so that meant that unless you could get a net return in excess of that, your wealth was reducing.
This meant that the only option to do that without stupid risks was property - investment in almost any other market was going to reduce the real value of your $.
For example, you could get 25% per annum interest on a 90 day bill, but even the withholding tax was going to reduce that to around 18.75% net and the highest marginal tax rate was going to decimate it.

So if property is the only answer, who was gonna fund it?

**pzkpfw** · 30th April 2015, 12:51

It's typical of religion, really.

They are not really talking about "interest free", they are talking about a loan with interest where it's structured so they can use different words for "loan" and "interest".

e.g.

Lloyds Bank has a similar product where the bank buys the house for the customer, who then pays the purchase price in monthly instalments.

As the bank is the legal owner of the property, the customer also pays a monthly rent to the bank, which decreases as they buy the bank's share of the property.

How dumb is their God to be fooled by that?

(To be clear; I see that sort of bollocks in all religions, I'm not singling out this particular religion for criticism.)