Why bank need cheap loan as low as 0% to make profit??

[AmoreJaz]

As I understand and if I am not mistaken OP's concern is that the private banks can get a loan from the central bank at a 0% interest rate while these banks would give 6-10% interest rate to their borrowers which refer to the small to medium enterprises, which in a glance could be really considered as a stratagem.

However private banks are business too that aside from the taxes they are paying to the government there are other expenses that they need to compensate for to keep their business running. Though 6-10% is quite high I am pretty sure that they are only meeting the government requirements I guess.

thats what i understand also from the OP, he's wondering why these small banks can charge about 6-10% interest, whereas, they got it at 0%. anyway, there's more than meets the eyes here. of course, at a glance, it seemed that these banks are screwing the individuals with high percentage of interest rate.
but as you said, they are just within the regulations of the Central Bank itself. because they will not operate outside its limitations. these banks have a lot of expenditures as well so they cant give to its borrowers the same interest as what they got it from. aside from the fact that they really do need to make profit, because it is business!

[MCobian]

It is very clear that private banks only want to generate as much profit as possible, so they provide loan interest of 6% -10%.
Even though they actually got a loan from the central bank with 0% interest. Private banks should be able to provide even lower
interest rates. Therefore, many small businesses go bankrupt in a pandemic situation, because they are unable to pay loan to banks
with high interest rates. Knowing this, I tried to run a business that I owned without the help of a loan from a bank.

[Twentyonepaylots]

Honestly your question have raised even more questions than answers, but that's a good thing. Nevertheless, if what you say is true, then this only shows how cruel banks can be. Charging people more when they can actually get a loan themselves scot-free. If ever, your country's central government should be able to intervene regarding this situation and help with these microbusinesses struggling to make ends meet during this pandemic crisis.

[iamsheikhadil]

This whole interest taking thing is a scam indeed. The central banks along with all banks are a major scam. By taking poor people's money and giving them greed of small interests, these banks give the money collected to big companies placing on them a big interest which automatically rises the price of the products the company produces which the common and poor people don't recognize and they spend their so little interest-profit ok buying things on an expensive rate. A better system should be there!

[bits4books]

Honestly your question have raised even more questions than answers, but that's a good thing. Nevertheless, if what you say is true, then this only shows how cruel banks can be. Charging people more when they can actually get a loan themselves scot-free. If ever, your country's central government should be able to intervene regarding this situation and help with these microbusinesses struggling to make ends meet during this pandemic crisis.

And what is the cruelty? This is ordinary usury, the principle of which has existed for many centuries. You take [somewhere] money and promise that you will give them a percentage.
After that, you give [someone] money and say that you are owed a certain %for it.
And then you come to your king and tell him that if he gives you money at 0%, then after a while more taxes will go to the Treasury because you will be able to distribute more money at % for the development of your business or something else.
The scheme is as old as the world and there is no cruelty here, as for me. No one owes anyone anything for free.

[Findingnemo]

Please explain in laymen term

Bank hand out the loan at 6-10% interest rate to Small Medium business
Central bank provide low rate (0%) loan to small bank to MAKE profit

The bank can’t survive with 0% interest rate?
How can small business survive with 6-10% interest rate?
How can people survive with 6-10% personal loan interest rate?
Why bank is above small business and human on interested rate privilege?
This is a major scam!

That is how banks are making money, even there are lot f hidden fees will be collected when we are taking loans like processing fee, etc but that is the banking business which is not really known by most of the people. When you have good business which needs capital then it is okay to take such loans because you are going to make profits like 20% which can justify the interest rates but new start ups will such loans are always risky.

[Broly46]

Exactly. The Bank cannot survive with such rates because the Bank's money is divided, in fact, into two parts.
"Credit" - those that the Bank takes for storage from people as a Deposit and charges any % on these deposits so that it is profitable for people to carry money to banks.
"Loan" - those that the Bank just gives out as a loan to people who pay the Bank % for using this money.
The Central Bank can issue loans at 0% because this is in fact a repayable debt, not a loan, and the profit will be as taxes received by the state.
Banks can't afford this luxury - at whose expense do they have to pay salaries, rent, operating expenses, etc., etc.? Just go to the Wikipedia article about banks and understand why this is happening, but of course it is much better to ask on the crypto forum how banks work.

Bank can give thousands of reasons everything is normal, that mean nothing when we can see inflation is going rampant wild, the food price alone shoot through the roof and the person who regulate the money supply?? The person who regulate the interest rate? The bank just want to point finger at everybody else but not themselves for all the money problem in the economic, this disgusting bank don’t collude a single day I don’t feel normal, it has been their profession to collude and steal, they’re no different than robber, and can you trust a robber, a blatant liars who broke the market in 2008, a colluding organisation that promise will keep inflation in check, to make this world better? And you wonder why bitcoin is needed to wake this world of this bank threat?😂

[Sapphire915]

You are right. Banks will never survive with 0% interest rate. But 6-10% interest rate is so adsurd. In any bank loans, we should always expect an interest in paying back, because its the banks ways of getting more profits. However, upon getting a loan, you should always see if the interest is reasonable enough and your business has the capability of paying loans with the corresponding interests. On the other hand, Central banks offered cheaper loans to assist the small and medium businesses nowadays and it has low interest I guess. Loan interests is totally a burden, and i must suggest that we should not engage with this high interest rates loans if there are still another ways possible.

[Findingnemo]

You are right. Banks will never survive with 0% interest rate. But 6-10% interest rate is so adsurd. In any bank loans, we should always expect an interest in paying back, because its the banks ways of getting more profits. However, upon getting a loan, you should always see if the interest is reasonable enough and your business has the capability of paying loans with the corresponding interests. On the other hand, Central banks offered cheaper loans to assist the small and medium businesses nowadays and it has low interest I guess. Loan interests is totally a burden, and i must suggest that we should not engage with this high interest rates loans if there are still another ways possible.

Due to pandemic banks offering loans with lower interest to increase the cashflow in the economy but central government gave them huge amount of money to offer loan for people but private banks are not offering those loans to everyone, they offer only for the people who is making money right now not for the people who actually got affected and lost their business.

[aesma]

Banks are dying with low central bank interest rates right now, not making much of a profit.

A small business loan might be at 5%, because a number of companies will not pay back, so the risk has to be spread by making everyone pay such a "high" rate.

Here in France, mortgages are relatively low risk because loans are insured, and the housing market is stable, so if you have a good salary, you can borrow big amounts to buy a flat/house, at less than 1% !

The bank is making no money on this, but just want to have a new client with good earnings that will probably have investments, spend a lot, etc.

For someone with an average salary, the rate is about 1,5% for 25 years.

[TheGreatPython]

Well, the main idea is the fact that central banks are not giving banks 0% interest because they want to make a profit, but the banks are giving you loans to make a profit. Plus the main idea would be the fact that if a bank fails to pay the loan back (which rarely ever happens) they could just seize everything the bank has, which means very very low default rates and usually very safe loan to give, whereas when banks give us the loans, there is a default rate where some people fail to pay their loans back, and since they have almost nothing you can't really seize anything that worths the same amount of money.

So, banks need to have higher rate to cover that as well. Combining the want for a profit and also the fact of defaulted loans, we get higher rates in the end.

[magneto]

Please explain in laymen term

Bank hand out the loan at 6-10% interest rate to Small Medium business
Central bank provide low rate (0%) loan to small bank to MAKE profit

The bank can’t survive with 0% interest rate?
How can small business survive with 6-10% interest rate?
How can people survive with 6-10% personal loan interest rate?
Why bank is above small business and human on interested rate privilege?
This is a major scam!

The central bank's benchmark rate movements are independent of private banking institutions unless ofc there is a level of corruption going on. Their mandated targets are generally a) unemployment and b) inflation targeting of 2-3% on avg, over time for most countries. There is nothing that says banks must survive even though implicit guarantees may be made.

To answer your question, there are certainly instances where banks charge high amounts of interest on consumer loans.

But there are two reasons for that, whether or not they justify the banks' actions: a) There is a disconnect between short term benchmark rates (i.e., fed funds, cash rate, whatever you wanna call it) and retail rates and b) There is substantial risk in personal/business loans compared to secured mortgages.

[Broly46]

Please explain in laymen term

Bank hand out the loan at 6-10% interest rate to Small Medium business
Central bank provide low rate (0%) loan to small bank to MAKE profit

The bank can’t survive with 0% interest rate?
How can small business survive with 6-10% interest rate?
How can people survive with 6-10% personal loan interest rate?
Why bank is above small business and human on interested rate privilege?
This is a major scam!

The central bank's benchmark rate movements are independent of private banking institutions unless ofc there is a level of corruption going on. Their mandated targets are generally a) unemployment and b) inflation targeting of 2-3% on avg, over time for most countries. There is nothing that says banks must survive even though implicit guarantees may be made.

To answer your question, there are certainly instances where banks charge high amounts of interest on consumer loans.

But there are two reasons for that, whether or not they justify the banks' actions: a) There is a disconnect between short term benchmark rates (i.e., fed funds, cash rate, whatever you wanna call it) and retail rates and b) There is substantial risk in personal/business loans compared to secured mortgages.

====

The layman term is simple like this

“It’s the business at fault”
The business always goes default, this cluster *uck of business is so full of risks and plaguing the entire bank balance sheet, let make the rate as high so all the business eventually can get wipe out from the balance sheet, this way more money for bank, bank rarely goes broke huh? It’s the rich playground now too big to failed! If the bank failed it just get defaults and the taxpayer will pay for the debt, or the business failed, taxpayer will pay for it too!

“It’s the personal loan at fault!”

Personal loan? Fine they’re too very risky, just keep it as high to the point where all of them get default despite we get the money at nearly zero percent interest rate (teehee!), the people go default? Taxpayer will pay for it, oh the wall? We will make Mexico pay for it too! Central bank debt is the debt owned by the nation, the nation = the taxpayer, yup, central bank debt = taxpayer debt, keep the rate low for the taxpayer, keep the rate high for greedy bastard small bank, central bank goes broke taxpayer gonna pay for it, why small bank even need to pay for that LOL! Time to *uckup taxpayer bad for real!

===

[bits4books]

Exactly. The Bank cannot survive with such rates because the Bank's money is divided, in fact, into two parts.
"Credit" - those that the Bank takes for storage from people as a Deposit and charges any % on these deposits so that it is profitable for people to carry money to banks.
"Loan" - those that the Bank just gives out as a loan to people who pay the Bank % for using this money.
The Central Bank can issue loans at 0% because this is in fact a repayable debt, not a loan, and the profit will be as taxes received by the state.
Banks can't afford this luxury - at whose expense do they have to pay salaries, rent, operating expenses, etc., etc.? Just go to the Wikipedia article about banks and understand why this is happening, but of course it is much better to ask on the crypto forum how banks work.

Bank can give thousands of reasons everything is normal, that mean nothing when we can see inflation is going rampant wild, the food price alone shoot through the roof and the person who regulate the money supply?? The person who regulate the interest rate? The bank just want to point finger at everybody else but not themselves for all the money problem in the economic, this disgusting bank don’t collude a single day I don’t feel normal, it has been their profession to collude and steal, they’re no different than robber, and can you trust a robber, a blatant liars who broke the market in 2008, a colluding organisation that promise will keep inflation in check, to make this world better? And you wonder why bitcoin is needed to wake this world of this bank threat?😂

by offering btc as a panacea, you are proposing to go from shaky order to endless chaos. Is that what you want? For any cryptocurrency, there is not even an infrastructure - and there is simply no desire to use it as a means of payment. Look around, what do you see? People are obsessed with cryptocurrencies not because it is some kind of progress and the present future, but because they can become millionaires in one day, or lose everything. For all of them, and most of them, cryptocurrency is just a gray kind of casino, where you can earn good money and come out a winner.
Do you remember that the casino always wins?

[Broly46]

Honestly your question have raised even more questions than answers, but that's a good thing. Nevertheless, if what you say is true, then this only shows how cruel banks can be. Charging people more when they can actually get a loan themselves scot-free. If ever, your country's central government should be able to intervene regarding this situation and help with these microbusinesses struggling to make ends meet during this pandemic crisis.

===

People often ignore thing that’s much more questionable, because the banker has succeed on brainwashing us to be a Pavlov dog: “everything is fine!” “Zero interest rate is fine!” It’s amazing every human being is just a Pavlov dog in disguise, they would stop questioning when they get enough of that indoctrination. But why I find it fascinating there are so many things we ignore already for too long that even banker don’t want to mentioned anymore, and all these little thing stack up against us and eventually forming a bubble and begin to pop in due time.

===

This whole interest taking thing is a scam indeed. The central banks along with all banks are a major scam. By taking poor people's money and giving them greed of small interests, these banks give the money collected to big companies placing on them a big interest which automatically rises the price of the products the company produces which the common and poor people don't recognize and they spend their so little interest-profit ok buying things on an expensive rate. A better system should be there!

===

To be fair, bankers are honest people making honest income from pay check to pay check, it’s just the interest rate itself is the culprit, I would emphasise on the interest itself being scams, but not the bank itself, and the person who regulate the interest rate, yup the president of the particular bank is a big criminal but no one can arrest that crooked criminal for the reason they’re two wrong, it become a right. That sound wrong but you know the proverb.

===

[Broly46]

Exactly. The Bank cannot survive with such rates because the Bank's money is divided, in fact, into two parts.
"Credit" - those that the Bank takes for storage from people as a Deposit and charges any % on these deposits so that it is profitable for people to carry money to banks.
"Loan" - those that the Bank just gives out as a loan to people who pay the Bank % for using this money.
The Central Bank can issue loans at 0% because this is in fact a repayable debt, not a loan, and the profit will be as taxes received by the state.
Banks can't afford this luxury - at whose expense do they have to pay salaries, rent, operating expenses, etc., etc.? Just go to the Wikipedia article about banks and understand why this is happening, but of course it is much better to ask on the crypto forum how banks work.

Bank can give thousands of reasons everything is normal, that mean nothing when we can see inflation is going rampant wild, the food price alone shoot through the roof and the person who regulate the money supply?? The person who regulate the interest rate? The bank just want to point finger at everybody else but not themselves for all the money problem in the economic, this disgusting bank don’t collude a single day I don’t feel normal, it has been their profession to collude and steal, they’re no different than robber, and can you trust a robber, a blatant liars who broke the market in 2008, a colluding organisation that promise will keep inflation in check, to make this world better? And you wonder why bitcoin is needed to wake this world of this bank threat?😂

by offering btc as a panacea, you are proposing to go from shaky order to endless chaos. Is that what you want? For any cryptocurrency, there is not even an infrastructure - and there is simply no desire to use it as a means of payment. Look around, what do you see? People are obsessed with cryptocurrencies not because it is some kind of progress and the present future, but because they can become millionaires in one day, or lose everything. For all of them, and most of them, cryptocurrency is just a gray kind of casino, where you can earn good money and come out a winner.
Do you remember that the casino always wins?

Michael Saylor the Microstategy was calling bitcoin a online gambling a.k.a the casino too, but look what his narrative today? Whether bitcoin is a scam or it’s a pin to debunk a greater scams, we shall see the result very soon, I’m not calling bank is the greater scams that required some rude awakening, just a guess work.

[Broly46]

It is very clear that private banks only want to generate as much profit as possible, so they provide loan interest of 6% -10%.
Even though they actually got a loan from the central bank with 0% interest. Private banks should be able to provide even lower
interest rates. Therefore, many small businesses go bankrupt in a pandemic situation, because they are unable to pay loan to banks
with high interest rates. Knowing this, I tried to run a business that I owned without the help of a loan from a bank.

You are right. Banks will never survive with 0% interest rate. But 6-10% interest rate is so adsurd. In any bank loans, we should always expect an interest in paying back, because its the banks ways of getting more profits. However, upon getting a loan, you should always see if the interest is reasonable enough and your business has the capability of paying loans with the corresponding interests. On the other hand, Central banks offered cheaper loans to assist the small and medium businesses nowadays and it has low interest I guess. Loan interests is totally a burden, and i must suggest that we should not engage with this high interest rates loans if there are still another ways possible.

They’re going around and tell everybody there ain’t free lunch in the world, everything has to pay for it, yet they are having free meal and pay for nothing? I think it’s a completely rip off, they pay for nothing while we all pay for hyperinflation, even hyperinflation isn’t the end of that, they’re gonna kill it post hyperinflation, that might not impact anybody else, they said everything is fine the interest rate for you and business is fine, we are fine too.

[Rengga Jati]

Bank hand out the loan at 6-10% interest rate to Small Medium business
Central bank provide low rate (0%) loan to small bank to MAKE profit

6-10% interest rate? WOw, I think that it is a very big amount of the interest rate that the bank needs. However, I ever know about the high-interest rate but only for property loans like in my country. However, if it is for a  am business, there should not be that high amount. But I don't know where you live so that I will not judge it true or not. It may be different from one to other banks.

Additionally, a bank with zero interest? EVen a central bank by the government in my country still get the interest although it is very small like zero point - 2%.

Commonly the banks will need a high rate and even with that around 2% interest rate, the banks are still having profits. Imagine tht we also deposit our money in banks and they make our deposits for loans to other people and they get profits from the loans as many as they can and we do not get anything or ol]nly very few banks. That is why this becomes one f the reasons why Bitcoin is created.

[bits4books]

Exactly. The Bank cannot survive with such rates because the Bank's money is divided, in fact, into two parts.
"Credit" - those that the Bank takes for storage from people as a Deposit and charges any % on these deposits so that it is profitable for people to carry money to banks.
"Loan" - those that the Bank just gives out as a loan to people who pay the Bank % for using this money.
The Central Bank can issue loans at 0% because this is in fact a repayable debt, not a loan, and the profit will be as taxes received by the state.
Banks can't afford this luxury - at whose expense do they have to pay salaries, rent, operating expenses, etc., etc.? Just go to the Wikipedia article about banks and understand why this is happening, but of course it is much better to ask on the crypto forum how banks work.

Bank can give thousands of reasons everything is normal, that mean nothing when we can see inflation is going rampant wild, the food price alone shoot through the roof and the person who regulate the money supply?? The person who regulate the interest rate? The bank just want to point finger at everybody else but not themselves for all the money problem in the economic, this disgusting bank don’t collude a single day I don’t feel normal, it has been their profession to collude and steal, they’re no different than robber, and can you trust a robber, a blatant liars who broke the market in 2008, a colluding organisation that promise will keep inflation in check, to make this world better? And you wonder why bitcoin is needed to wake this world of this bank threat?😂

by offering btc as a panacea, you are proposing to go from shaky order to endless chaos. Is that what you want? For any cryptocurrency, there is not even an infrastructure - and there is simply no desire to use it as a means of payment. Look around, what do you see? People are obsessed with cryptocurrencies not because it is some kind of progress and the present future, but because they can become millionaires in one day, or lose everything. For all of them, and most of them, cryptocurrency is just a gray kind of casino, where you can earn good money and come out a winner.
Do you remember that the casino always wins?

Michael Saylor the Microstategy was calling bitcoin a online gambling a.k.a the casino too, but look what his narrative today? Whether bitcoin is a scam or it’s a pin to debunk a greater scams, we shall see the result very soon, I’m not calling bank is the greater scams that required some rude awakening, just a guess work.

And what is the bank's fraud? The fact that he gives you the money you need today and asks you to return a little more for it? Or is it that he offers to take your money today and give you back a little more tomorrow?
What is your complaint against banks as such? Except for the failure in 2008-the fault here, I believe, is not that in the banks as a whole, but rather in the people themselves and in the fact that we all want to somehow earn a comfortable eldery and no more.
you don't go saving every homeless person from a thunderstorm when it starts. You are sitting in your own house/apartment with a cup of tea, do you?

[Broly46]

Exactly. The Bank cannot survive with such rates because the Bank's money is divided, in fact, into two parts.
"Credit" - those that the Bank takes for storage from people as a Deposit and charges any % on these deposits so that it is profitable for people to carry money to banks.
"Loan" - those that the Bank just gives out as a loan to people who pay the Bank % for using this money.
The Central Bank can issue loans at 0% because this is in fact a repayable debt, not a loan, and the profit will be as taxes received by the state.
Banks can't afford this luxury - at whose expense do they have to pay salaries, rent, operating expenses, etc., etc.? Just go to the Wikipedia article about banks and understand why this is happening, but of course it is much better to ask on the crypto forum how banks work.

Bank can give thousands of reasons everything is normal, that mean nothing when we can see inflation is going rampant wild, the food price alone shoot through the roof and the person who regulate the money supply?? The person who regulate the interest rate? The bank just want to point finger at everybody else but not themselves for all the money problem in the economic, this disgusting bank don’t collude a single day I don’t feel normal, it has been their profession to collude and steal, they’re no different than robber, and can you trust a robber, a blatant liars who broke the market in 2008, a colluding organisation that promise will keep inflation in check, to make this world better? And you wonder why bitcoin is needed to wake this world of this bank threat?😂

by offering btc as a panacea, you are proposing to go from shaky order to endless chaos. Is that what you want? For any cryptocurrency, there is not even an infrastructure - and there is simply no desire to use it as a means of payment. Look around, what do you see? People are obsessed with cryptocurrencies not because it is some kind of progress and the present future, but because they can become millionaires in one day, or lose everything. For all of them, and most of them, cryptocurrency is just a gray kind of casino, where you can earn good money and come out a winner.
Do you remember that the casino always wins?

Michael Saylor the Microstategy was calling bitcoin a online gambling a.k.a the casino too, but look what his narrative today? Whether bitcoin is a scam or it’s a pin to debunk a greater scams, we shall see the result very soon, I’m not calling bank is the greater scams that required some rude awakening, just a guess work.

And what is the bank's fraud? The fact that he gives you the money you need today and asks you to return a little more for it? Or is it that he offers to take your money today and give you back a little more tomorrow?
What is your complaint against banks as such? Except for the failure in 2008-the fault here, I believe, is not that in the banks as a whole, but rather in the people themselves and in the fact that we all want to somehow earn a comfortable eldery and no more.
you don't go saving every homeless person from a thunderstorm when it starts. You are sitting in your own house/apartment with a cup of tea, do you?

Well that would be very obvious, nobody like getting lock down, nobody like getting pandemics, nobody like getting their food bill skyrocketing through the roof like nothing else (over 1,000,000% inflation rate), nobody like living a life that will constantly need to compete who has faster monetary velocity, nobody like to living on the hood that hey have a heavy loan just after leaving school this monetary system rarely reward the provider aka it punish the person who contribute to the world by being selfless, this system reward the crooked financial people, many university is under funded, many professor who invent great tech are under funded all of them need to living on extreme frugal yet need to make change to this ever rotten corrupted financial system, you can have plenty to hate on this system, how am I doing fare, good but I’m not doing great as before pandemics, because I’m always compete outsmart the system, for many of the people around me they’re not so fortunate, but would you want to help them?