Why lend?

[Joe200]

Trying to understand how lending works. Spent some time looking through BTCJam. I don't understand why anyone would lend. Someone enlighten me please.

* If you've been lending for awhile, could you share whatever experience or stats that you feel comfortable sharing?

How long have you been lending? How much (percent-wise) have you made on lending? (Or how much can one make on lending, if you don't want to get too personal.) How many loans do you have going at once? What percent of loans do you lose on?

* Here is the way I see it. You lend someone the money. They do whatever with it -- localbitcoins trading, trading bot, invest in ATM's, mining equipment, etc. If they do well, you get your money back with interest. If they don't, you lose.

It's like an investment, with one exception. Your reward is limited by the interest rate. They could be making a lot more than the interest rate, but you only get back the interest. But your risk is unlimited. If they lose it all, you lose it all. This is assuming that they are not even a scammer, that they are trying to make a good effort. Scammers are a whole other layer of problems.

* Let's say they don't pay and BTCJam sends your case to net-arb. It takes many months (with your money tied up). Then finally they issue a decision. Now what? To even hope to get the money back, you have to pay net-arb a $35 fee first.

For this to be worth it, the loan amount has to be a lot higher than the fee. Meaning, you should be loaning out at least 0.5 coins per loan, at a minimum. Is anyone doing this? All I see is people making much smaller loans.

* With loans "in real life", the risk of loss isn't really there or is a lot smaller. The banks have a well-oiled machine for how to collect. I think that's the weakness with btc lending -- no one knows how to collect.

A btc collections agency with real power to collect would change everything. There is no such thing, yet.

[acs267]

Some people loan because they charge interest. It's a good way to grow your Bitcoins without trading, and you get a good guarantee if you carry out a traditional loan (Collateral +/- Loan) that you'll get money back. I don't see why would should give a damn about if Jonny Fisher makes 2x the loan. It's really not your right to change the agreement because of it, or even dabble on the fact he made way more. And you should understand what a loan is before lending money to people, anyway.

Collateral +/- Loan can stop scammers, and, possibly only giving no collateral loans to highly trusted people.

What do you mean by 'no one knows how to collect'?

A investment is riskier than a loan, to be honest.

[Joe200]

Some people loan because they charge interest. It's a good way to grow your Bitcoins without trading, and you get a good guarantee if you carry out a traditional loan (Collateral +/- Loan) that you'll get money back. I don't see why would should give a damn about if Jonny Fisher makes 2x the loan. It's really not your right to change the agreement because of it, or even dabble on the fact he made way more. And you should understand what a loan is before lending money to people, anyway.

Collateral +/- Loan can stop scammers, and, possibly only giving no collateral loans to highly trusted people.

What do you mean by 'no one knows how to collect'?

A investment is riskier than a loan, to be honest.

My point was that the reward is limited but the loss is not... It's not important.

I was talking mainly about BTCJam, where they don't have collateral. How does collateral work? They send you the altcoins and you send them the btc? Besides altcoins, nothing else makes a good collateral cuz you can't send it easily. With altcoins, if the value of alt/btc falls, they have no reason to repay.

Without collateral, if someone doesn't pay, there is no way to collect -- or at least it's really hard to collect.

[Killerloop]

* Let's say they don't pay and BTCJam sends your case to net-arb. It takes many months (with your money tied up). Then finally they issue a decision. Now what? To even hope to get the money back, you have to pay net-arb a $35 fee first.

BTCJam pays net-arbs fee

* With loans "in real life", the risk of loss isn't really there or is a lot smaller. The banks have a well-oiled machine for how to collect. I think that's the weakness with btc lending -- no one knows how to collect.

100% of Net-arb decision so far were converted into rulings by courts. It is more serious than you think.

A btc collections agency with real power to collect would change everything. There is no such thing, yet.

With a converted ruling any bailiff or debt collection agency will do. I have a defaulted loan which will go to arbitration soon. After everything is said and done I will have a ruling for USD Dollars not bitcoins.

And some dude out there will be in a world of hurt, incidentally the defaulted loan has a 1% daily ratio.

With altcoins, if the value of alt/btc falls, they have no reason to repay.

No my friend. You usually are required to post a 120% altcoin collateral. If at any time the lender panics due to a alt/btc value drop he will sell the collateral immediately.

[Joe200]

100% of Net-arb decision so far were converted into rulings by courts. It is more serious than you think.

Where can I find the exact stats on that?

How much do you get back? Do you get back more than what was owed -- for the inconvenience of having to wait? Or do you get back less -- because the debt collection agency has to get paid?

With a converted ruling any bailiff or debt collection agency will do. I have a defaulted loan which will go to arbitration soon. After everything is said and done I will have a ruling for USD Dollars not bitcoins.

That's another problem. If btc goes up (as it always does), there is huge incentive for the borrower to not pay back the btc, but to pay the usd instead at whatever the conversion rate was many months ago.

And some dude out there will be in a world of hurt, incidentally the defaulted loan has a 1% daily ratio.

What does the 1% mean? I'm new to loans.

No my friend. You usually are required to post a 120% altcoin collateral. If at any time the lender panics due to a alt/btc value drop he will sell the collateral immediately.

Good to know.

[Killerloop]

That's another problem. If btc goes up (as it always does), there is huge incentive for the borrower to not pay back the btc, but to pay the usd instead at whatever the conversion rate was many months ago.

Not gonna happen.

The arbitration will rule in your favor for a certain amount of BTC or USD if the loan was USD-tied.

From that point on you are on your own, I suggest spot on conversion and then go to court to enforce your rights

[bl4kjaguar]

* With loans "in real life", the risk of loss isn't really there or is a lot smaller.

You're right!! Banks do not ever loan out their own money, under any circumstances, so there is no risk of loss whatsoever.

And in case you need a citation...
According to Forbes, banks do not lend out reserves.

[vabtc]

My concern with BTCJam's no collateral loans is that there is nothing stopping someone with a Judgement on their record from telling the Collection agencys to take a hike and never paying a dime back.  It's a bad mark on their credit but if it's shot anyway, who cares?  The laws are definitely in the borrower/scammers favor.  I personally would never seek interest thru bitcoin loans.  What if you loan 1 BTC and the price spikes to 5K, and Bob can't possibly afford to buy 1BTC to pay you back.  It's just rife with problems, but I hope everyone gets paid.  I did Prosper.com for a bit and ended up breaking even after one scammer just walked away from a $1300 loan. No money collected.  All in all, I experienced a ~20% default rate on my loans, and Prosper didn't do dick about it.

[Campsis]

I have never had any problems getting a loan on BTCjam


I now have paid back a total of 3BTC, never made any late payments and never missed any payments, infact all of my loans have been paid early!
At the moment i have a listing of 7.5BTC loan at 10% interest which means i have to pay back 13.7,  and it is 20% funded already.

There are people that scam in there ofcourse, like everywhere else! I would never scam anywhere, if anyone scammed on btcjam their lifes would be fucked. They will get taken to court by BTCjam i suppose? I'm not sure how it works if you don't pay ^^

[Vod]

My concern with BTCJam's no collateral loans is that there is nothing stopping someone with a Judgement on their record from telling the Collection agencys to take a hike and never paying a dime back.  It's a bad mark on their credit but if it's shot anyway, who cares?

At least in Canada, you can take the net-arb award and go garnish their bank accounts.  They can't stop you from taking the money, and there are no appeals.

[Campsis]

My concern with BTCJam's no collateral loans is that there is nothing stopping someone with a Judgement on their record from telling the Collection agencys to take a hike and never paying a dime back.  It's a bad mark on their credit but if it's shot anyway, who cares?

At least in Canada, you can take the net-arb award and go garnish their bank accounts.  They can't stop you from taking the money, and there are no appeals.

What if a person turns around and says "Someone stole my ID to take out the loans, i know nothing about it  " ?

[Vod]

What if a person turns around and says "Someone stole my ID to take out the loans, i know nothing about it  " ?

Doesn't matter - the decision has been made already and there are no appeals.

[Campsis]

What if a person turns around and says "Someone stole my ID to take out the loans, i know nothing about it  " ?

Doesn't matter - the decision has been made already and there are no appeals.

So if someone steals my ID and stuff, and takes out a loan, I'll be the one paying it back? Makes no sense lol.

[Light]

How long have you been lending? How much (percent-wise) have you made on lending? (Or how much can one make on lending, if you don't want to get too personal.) How many loans do you have going at once? What percent of loans do you lose on?

It's like an investment, with one exception. Your reward is limited by the interest rate. They could be making a lot more than the interest rate, but you only get back the interest. But your risk is unlimited. If they lose it all, you lose it all. This is assuming that they are not even a scammer, that they are trying to make a good effort. Scammers are a whole other layer of problems.

A btc collections agency with real power to collect would change everything. There is no such thing, yet.

I haven't been lending that much so far, but from what I've seen on this board and personal experience, you can make anywhere from 10% to 30% with little risk. The number of loans you have out at once is simply a function of how much you want and have available to loan.

Now to your point about risk - as I've stated you can significantly minimise your risk if you simply only take loans where the borrower offers collateral (either in digital form such as altcoins or physical shippable goods). If these are held by an escrow then unless your escrow runs off, you're pretty much set. In effect you act like a bank, in general banks only make only if you have sufficient assets that they may seize and sell to repay the debt. However, in this case the assets are given to an escrow to ensure that they are available to be sold should defaulting occur whereas a bank would take your assets through the legal system.

[Joe200]

Is there an escrow service that takes care of this? Where they hold the goods, even physical goods?