BTCJam Loan (Home Improvement) - 200 BTC Principle, Re-payable over 6 Months

[fluffypony]

Hi all,

   I'm going to re-hash my btcjam listing that I just put up - for any that would like to ask questions please do so. I am also more than happy to provide copies of the documentation provided to btcjam, as well as any additional documentation you care to request. I have outlined the capital and repayment details (this is not an interest free loan, of course:) towards the end of this. At this juncture I'm not willing to risk borrowing and re-paying on BTC that is unlinked to fiat currency. The reason for this has less to do with the perceived "instability" of BTC to the USD, but because all of the costs I incur will be in fiat currency. If I could convince the builders to accept BTC that would be a different story entirely;)

   My wife and I are looking for a loan of about $30 000 that we will be using to redo part of our home. I would like to stress that we can get this from our bank, but the potential interest-rate savings on BTCjam (and here:) make it worth our while to try here first. Apart from my other documentation that BTCjam have already verified, I have also submitted my payslip that demonstrates my ability to comfortably repay this loan regardless of what happens. This isn't a business proposal that could flop at any moment, this is a regular ol' loan.

   Specifically, we are looking to build a balcony on the middle floor of our house. You can see the image gallery of what it looks like right now here: http://imgur.com/a/e97PT. The basic idea (as drawn by a friend who is an architect, and the plans for which have been approved by the city council) is a wrap-around balcony. Effectively it will be replacing the current walls/windows with glass and sliding doors. Electronic blinds will wrap up into the ceiling (I know it's high), and extend down to keep the area cool when the morning sun shines in. We'll have a pizza oven built on to the left-hand edge of the deck for those nights when we want to make pizza.

   Repayment terms are 180 days, payable on the 1st of the month (payday is the 25th for me, so it gives me 5 days to buy BTC if necessary and fund my BTCjam account), and the interest portion on each repayment is 6%. This loan will be Dollar-indexed at mtgox rates to avoid major hiccups should the currency fluctuate wildly. I will endeavour to pay the loan back sooner rather later, partly because I hate being indebted to anyone, but also because I am cognisant of everyone wanting to profit from BTC. This way you can make your money work for your both now and later!

   By the way - btcjam's calculation on the loan is ฿200 borrowed, ฿40.67253 repaid every month for 6 months. Any lending concluded off of btcjam's site will be accompanied by a basic agreement I have drafted (we can use one of yours should you have one) that will ensure there is no confusion as to the terms of the loan, and that also gives you full legal right to pursue the claim using the full power of the law should I default on it. Also, just to answer the question before it is asked: the bank's lending rate is quite favourable, but they don't want to give us a loan of this size for such a short term (ie. they want to bleed us for as long as possible:) Repaying the loan quickly is in my best interests, which makes this far more appealing than the bank.

   Feel free to hit me up here or on #bitcoin-otc (fluffypony) - I may be connected but AFK, so if I don't respond quickly just leave a message and I'll get back to you.

   All the best!

     Ric

[Vod]

I would like to stress that we can get this from our bank, but the potential interest-rate savings on BTCjam (and here:) make it worth our while to try here first.

   By the way - btcjam's calculation on the loan is ฿200 borrowed, ฿40.67253 repaid every month for 6 months.

So you will be paying  ฿40 interest in 6 months on a ฿200 loan - that is 40% APR.

You can get a bank loan for a lot cheaper.  Go that route instead.

[fluffypony]

So you will be paying  ฿40 interest in 6 months on a ฿200 loan - that is 40% APR.

You can get a bank loan for a lot cheaper.  Go that route instead.

Yeah but there's a certain thrill in taking out a (relatively large) loan without involving a financial institution or borrowing from friends/family. I'm hoping that, in a sense, this could be the future of personal finance - inter-personal finance with a shared risk model like the one BCTjam espouses. This is something we'd normally either save for, or take a loan out and repay - depending on our measure of patience at the time. And hey - if this doesn't work we will obviously go the bank route, but this is fun Plus it took me like 2 weeks to convince the wife we should give it a spin! The additional interest is there to make it appetising to lenders (given the number of scams encountered here and on BCTjam on a daily basis), but also because I fully expect part of this loan to come from here and that I'll have to take part of it out as a regular ol' bank loan. I'm hoping that my incurring the additional cost in this loan, coupled with a positive experience for the lenders, will go some ways to restoring the feeling of confidence in the community. Ultimately, if proper loans (not scammy "reputation builder" loans or awfully vague "business ideas") are granted and paid, perhaps it will lead to the establishment of more formalised practices when it comes to BTC lending - perhaps ala bitcoin-otc's  Web of Trust model or something similar.

Edit: thanks for engaging - 8029366cc43e7db934ec1876cd0d5951624e1742b801f3f43691c59603038701 sent your way:)

[Vod]

If anyone decides to lend to you, I would strongly advise them to take a lien out on the property being renovated until the loan is repaid.   Something doesn't seem right about someone wanting to pay 40% interest (an extra $5,000!) when they could pay a lot less by going through a bank.

Thanks for the bitcent.  

[fluffypony]

If anyone decides to lend to you, I would strongly advise them to take a lien out on the property being renovated until the loan is repaid.   Something doesn't seem right about someone wanting to pay 40% interest (an extra $5,000!) when they could pay a lot less by going through a bank.

Thanks for the bitcent.  

No problemo:) As I mentioned, this is an experiment in a shifting micro-economic landscape, just as BTC is an experiment. Additionally, I honestly don't expect it to be fully funded in BTC.

However, without meaning any disrespect, how often have you taken out sizeable personal loans from the bank? The rate is based on the rates I've observed on BTCjam, and is far, far better than the expected interest rate I'd get from my financial institution (minimum interest rate on a 12 month loan from them is 8.5%). For eg. - whilst I could negotiate around it a bit, my sister and brother-in-law recently took out a $16 700 loan from them, and it could not be paid off over less than 24 months. The monthly installment on that amount is $980. That means that by the time it's paid off, they will have paid $23 520 (an extra $6820!). So no, the rate I'm looking at would be better than the bank would offer me, but would be worse than if I drew it out my bond.

References confirming my assertions above: Nedbank loan calculator, DirectAxis loan calculator, Reserve Bank's current indices showing Prime Interest Rate at 8.5%

Whilst I appreciate you looking out for the community, please don't shout "something doesn't seem right" when such an opinion is based on guesswork and not on easily verifiable fact:)

[Vod]

Whilst I appreciate you looking out for the community, please don't shout "something doesn't seem right" when such an opinion is based on guesswork and not on easily verifiable fact:)

Well, it is a fact that 40% is a much worse rate than 8.5%, so yes something is not right here.  I don't know what kind of math you can use to make it look better, because it's not.

Anyway, I don't have enough free coins to fill this, so I'll just wish you good luck.  As long as whoever funds it does their property owner research and takes out a legal lien on the property, they should be safe. 

[fluffypony]

Well, it is a fact that 40% is a much worse rate than 8.5%, so yes something is not right here.  I don't know what kind of math you can use to make it look better, because it's not.

Anyway, I don't have enough free coins to fill this, so I'll just wish you good luck.  As long as whoever funds it does their property owner research and takes out a legal lien on the property, they should be safe. 

There's no fancy math at play - the interest rate calculator on BTCjam is pretty solid:



Also, the loan calculators I linked to are directly on the websites of financial institutions, so they're equally solid:) Cheers!

[Vod]

6 payments x 40btc = 240btc

240 paid back from 200 in 6 months is approx 40% APR, not 6%.

What am I missing?   

[smracer]

What collateral are you offering?  Do you have the plans already completed?  What architecture firm are you using?

[fluffypony]

What collateral are you offering?  Do you have the plans already completed?  What architecture firm are you using?

Plans have already been completed a few months ago, and were approved by the city council three weeks ago. As mentioned - I've got a friend who is an architect (he qualified last year) who drew it up, civil engineering was done by a local firm. Should a (serious) investor wish to confirm that it can be arranged, but there is a fine line between transparency and providing enough information to enable identity theft. I will not dish out documentation willy-nilly. And, to be brutally honest, if half-way through the project I decided I wanted to reapportion the funds used and take a stack of cash and create a Scrooge McDuck pool I should be entitled to that - it's a personal loan, after all, and the key here is establishing that I can pay the funds back without "ASIC mining" or "awesome business idea that will definitely make money".

In terms of collateral, there would be a contractual stipulation allowing the money to be legally recovered from my home loan in the event of a default. I cannot allow a "lien" to be registered for two reasons: the bank does not allow liens on property for which there is still an active home loan, and local law does not facilitate liens (it does allow a bond over the property to be registered at the Deeds Office, but that is ill advised and in any event would break the bank's terms and conditions). The bank does, however, allow me to use my home loan as collateral, and the legal instruments for recovering those funds (even for lenders overseas) are well established, relatively cheap, and easy to enforce.

[fluffypony]

As someone studying Architecture (3/7 years completed!), I would be interested in seeing the plans, sections and elevation of said renovations and additions.

At least I will able to add weight or point out any potential problems...

Much appreciated, and congrats on getting that far in your degree:) The plans have already been reviewed and signed off on by a civil engineering firm, and have been approved by the city council, so any changes at this juncture would be...problematic. Also, see my previous comment in this thread:) Thank you again for the offer!

[🏰 TradeFortress 🏰]

Six percent a month and it's less than your bank? Your bank charges more than 101% APR for a home improvement loan?

[Tomatocage]

BTCJam verification means absolutely nothing. Going by this forums past history you're most likely to get the BTC and just disappear.

[fluffypony]

Six percent a month and it's less than your bank? Your bank charges more than 101% APR for a home improvement loan?

Check the links to the loan calculators in my post above.

[🏰 TradeFortress 🏰]

200 -> 244 BTC, 22% for 6 months

48.8% APR, *unless* you screw up activating the listing and have to pay 7 months. You sure you can't get a loan from a bank for lower than that? Most credit cards (to those with some amount of credit) are under that.

[fluffypony]

BTCJam verification means absolutely nothing. Going by this forums past history you're most likely to get the BTC and just disappear.

Which is why I offer any serious lender verification of their own - I'm pretty sure my post made that abundantly clear.

I think it's important for the community to protect itself against potential scams, really important. But I also think that a decentralised currency cannot exist without a full bouquet of financial services - including money lending services. This loan - ANY loan - should be treated with the same formal procedure: do your due diligence, talk to the person on Skype and on the phone, verify documentation yourself, get a signed-off contract that enables you to collect if the individual defaults. Defaulters are not necessarily scammers - but that does not mean that you should not be entitled or able to get your money back.

BTCjam is great in that it spreads the risk, and you don't have one person satiated with a large lending risk. On the other hand, if the past has shown that people are likely to do a runner, then the wise lender does his own research regardless of how small his risk portion is.

[fluffypony]

The interest rate is **per month**, not per year. 6% a month is 101% APR.

Both the calculators I linked to don't even allow you to enter a % - they are based on the banks current offering. Here, I'll link to them again for your benefit: Nedbank loan calculator, DirectAxis loan calculator. At any rate (excuse the pun) I'm basing the amount on what the BTCjam calculator spits out (and the rate on what others on BTCjam have been offering). What difference does it make if I borrow 200 and pay back 240 over 24 months or over 6 months? The only issue is that a faster repayment means a higher effective APR. But if I took a 24 month loan from the bank and attempted to pay it back over 6 they'd penalise me anyway, so it's not like it would make any difference. Everyone needs to stop getting hooked on the APR - that is completely besides the point here. I've thought about it, I've discussed it with my wife, I've compared it to my banks 24-month totals, and I've decided I'd prefer the same amount spread over a short amount of time. I do NOT want to be paying off a loan in two years, thank you very much.

[🏰 TradeFortress 🏰]

Okay, well, the fiat banks around where you live charge insane amounts.

[fluffypony]

Okay, well, the fiat banks around where you live charge insane amounts.

Which is why BTCjam/here is a much better prospect:)

[Tomatocage]

What can you offer for collateral?