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Author Topic: [WANTED] Secured Loan for Apartment Deposit  (Read 2685 times)
copumpkin
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March 19, 2012, 02:41:23 PM
 #21

I'm seeing three people now talk about problems and dangers etc regarding using bitcoin for the loan.

I'll restate this a third time:

The loan is fixed USD loan, just paid in BTC. I cash out of BTC as soon as I get the loan. I buy BTC for spot value of what I am paying back when I pay it back. I fail to see why that is "dangerous" or "non-beneficial".

I acknowledged this in my post. I don't think there's any currency risk in this loan, but bitcoin lenders have more counterparty risk than your landlord would, so I'd expect you to get shafted more here than you would if you just paid the standard rent rate. Assuming rational behavior all around, that is, which might be a pretty big assumption Smiley
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Matthew N. Wright
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March 19, 2012, 02:53:24 PM
 #22

I get it now.

Even people who are long on Bitcoin will still have to spend their coins eventually. Money is meant to be spent  Roll Eyes

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March 20, 2012, 03:39:14 AM
 #23

Not commenting on this other than to say that I also live in Korea, and Matt's description of the various rental/deposit systems here is pretty much spot on. So if you're sitting there wondering WTF is up with that, well, welcome to our life.

What is the landlord's incentive for this? On the figures Matthew posted, the landlord would need to earn around 20-25% p.a. on the deposit to break even with lost rent compared with a "normal" lease. How much is the standard risk-free interest rate in Korea at the moment?

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March 20, 2012, 01:15:59 PM
 #24

Not commenting on this other than to say that I also live in Korea, and Matt's description of the various rental/deposit systems here is pretty much spot on. So if you're sitting there wondering WTF is up with that, well, welcome to our life.

What is the landlord's incentive for this? On the figures Matthew posted, the landlord would need to earn around 20-25% p.a. on the deposit to break even with lost rent compared with a "normal" lease. How much is the standard risk-free interest rate in Korea at the moment?

I honestly have no idea. I've run the numbers myself a bunch of times and it really makes no sense to me at all. Benchmark rate is about 3 or 3.5%. They must just really value cash in hand instead of dealing with monthly cash flows or something. I would assume there is some kind of regulations in place concerning what they can do with that money. I can't see them being allowed to reinvest it in anything with any real risk/rate of return.

It's just weird.

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March 20, 2012, 10:13:24 PM
 #25

Not commenting on this other than to say that I also live in Korea, and Matt's description of the various rental/deposit systems here is pretty much spot on. So if you're sitting there wondering WTF is up with that, well, welcome to our life.

What is the landlord's incentive for this? On the figures Matthew posted, the landlord would need to earn around 20-25% p.a. on the deposit to break even with lost rent compared with a "normal" lease. How much is the standard risk-free interest rate in Korea at the moment?
An unsavory tenant would likely not destroy a dwelling if he has $20k to lose for doing so. However, with lower amounts, the value of being lazy & otherwise unsavory may exceed the value of the security deposit.

Similar to punishment through law. If the punishment is $250, I don't care too much about possibly violating it and taking my chances being caught. If the punishment is 10 years in rape-ville, I would not take a chance at violating the law except in extreme circumstances.

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March 20, 2012, 10:46:09 PM
 #26

Not commenting on this other than to say that I also live in Korea, and Matt's description of the various rental/deposit systems here is pretty much spot on. So if you're sitting there wondering WTF is up with that, well, welcome to our life.

What is the landlord's incentive for this? On the figures Matthew posted, the landlord would need to earn around 20-25% p.a. on the deposit to break even with lost rent compared with a "normal" lease. How much is the standard risk-free interest rate in Korea at the moment?
An unsavory tenant would likely not destroy a dwelling if he has $20k to lose for doing so. However, with lower amounts, the value of being lazy & otherwise unsavory may exceed the value of the security deposit.

Similar to punishment through law. If the punishment is $250, I don't care too much about possibly violating it and taking my chances being caught. If the punishment is 10 years in rape-ville, I would not take a chance at violating the law except in extreme circumstances.

I think he's talking about incentive as in "How does the landlord make any money", and the truth is, the "free" apartments I'm talking about are typically much more expensive than what I mentioned, but I know a few places that the rent would be about $100 with a $20k deposit.

Rule of thumb in Korea is, larger deposit = cheaper rent.

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March 20, 2012, 10:50:37 PM
 #27

I think he's talking about incentive as in "How does the landlord make any money", and the truth is, the "free" apartments I'm talking about are typically much more expensive than what I mentioned, but I know a few places that the rent would be about $100 with a $20k deposit.

Rule of thumb in Korea is, larger deposit = cheaper rent.
As long as the asset isn't depreciating significantly in value (which it likely won't [outside of normal wear & tear] given the huge deposit), there is very little risk of the landlord losing money, so revenues can be much lower while still keeping a healthy profit factoring in bad tenants across many samples -- similar to wanting FPGAs over GPUs for mining. That lower risk of bad tenants probably also relieves the landlord of stress, time consumption, and sudden needs to spend funds on repair in case of property damage.

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March 20, 2012, 10:51:43 PM
 #28

I think he's talking about incentive as in "How does the landlord make any money", and the truth is, the "free" apartments I'm talking about are typically much more expensive than what I mentioned, but I know a few places that the rent would be about $100 with a $20k deposit.

Rule of thumb in Korea is, larger deposit = cheaper rent.
As long as the asset isn't depreciating significantly in value (which it likely won't [outside of normal wear & tear] given the huge deposit), there is very little risk of the landlord losing money, so revenues can be much lower while still keeping a healthy profit factoring in bad tenants across many samples -- similar to wanting FPGAs over GPUs for mining. That lower risk of bad tenants probably also relieves the landlord of stress, time consumption, and sudden needs to spend funds on repair in case of property damage.

I still think you're missing his (and my) original point.

Normally, you would pay rent. That is where the landlord's income comes from. I think the question he was asking was "how does the landlord make any money?". And the answer was my response.

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March 20, 2012, 10:56:25 PM
 #29

I think he's talking about incentive as in "How does the landlord make any money", and the truth is, the "free" apartments I'm talking about are typically much more expensive than what I mentioned, but I know a few places that the rent would be about $100 with a $20k deposit.

Rule of thumb in Korea is, larger deposit = cheaper rent.
As long as the asset isn't depreciating significantly in value (which it likely won't [outside of normal wear & tear] given the huge deposit), there is very little risk of the landlord losing money, so revenues can be much lower while still keeping a healthy profit factoring in bad tenants across many samples -- similar to wanting FPGAs over GPUs for mining. That lower risk of bad tenants probably also relieves the landlord of stress, time consumption, and sudden needs to spend funds on repair in case of property damage.

I still think you're missing his (and my) original point.

Normally, you would pay rent. That is where the landlord's income comes from. I think the question he was asking was "how does the landlord make any money?". And the answer was my response.
I think you're expecting me to be able to comprehend what I read.  Smiley Reading the OP thoroughly (I originally thought it only said "near-free"), no, I don't see how that makes sense for landlords, unless maybe they really regret getting into landlording but can't sell the properties.

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March 20, 2012, 10:58:36 PM
 #30

I think you're expecting me to be able to comprehend what I read.  Smiley Reading the OP thoroughly (I originally thought it only said "near-free"), no, I don't see how that makes sense for landlords, unless maybe they really regret getting into landlording but can't sell the properties.

In actuality, it is "near-free" in most cases (unless you drop $200,000 down). Even with $20k, I would expect to pay $100 at least for rent but that's better than $750.

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March 22, 2012, 03:27:54 AM
 #31

Is it true that loans in korea run for like 70% interest per day? I'd already heard that koreans use property as a savings account, but I wasn't sure how much to believe since it all sounded crazy o.0

Also, I can see at least two problems with the way this loan is set up:
1: the way you wrote it up the interest is paid in USD, whereas if you take a loan in BTC it's generally expected that you'll pay it back in BTC (as with any other currency).

2: The general interest rates (from what I've seen so far) are ~10% per month. 20% for a year is about 1/15th the amount you can make from compounding general interest on BTC =\. Also, USD interest (esp with inflation) is probably much lower than 20%/y anyway, so you'd be better of finding a way to borrow dollars like everyone else in the world does, if that's possible anyway.

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March 22, 2012, 04:39:39 PM
 #32

Also, I can see at least two problems with the way this loan is set up:
1: the way you wrote it up the interest is paid in USD, whereas if you take a loan in BTC it's generally expected that you'll pay it back in BTC (as with any other currency).

Matthew has answered this atleast 9001 times in this thread so I'm going to answer it for him this time.

He plans to get the BTC, convert to USD and use. Then every month (lets pretend hes repaying $500 a month) he'll take his repayment of $500, convert that to bitcoin at the price at that time, and pay.



So he might get a loan (for example) of 500BTC. He converts that to usd and gets $2500.

Next month, the price of BTC sky rockets to $10,000/btc. If he had a fixed BTC amount to repay, he'd now be fucked and have to repay $5,000,000 worth of BTC back, but because he's repaying at USD prices, he now only has to pay 0.25BTC back in total for the 500BTC loan.



So if bitcoin goes up or down, neither lendee or lender is affected, and lender can lend in BTC and lendee can repay in BTC. the loan is "hedged" on usd.

2: The general interest rates (from what I've seen so far) are ~10% per month. 20% for a year is about 1/15th the amount you can make from compounding general interest on BTC =\. Also, USD interest (esp with inflation) is probably much lower than 20%/y anyway, so you'd be better of finding a way to borrow dollars like everyone else in the world does, if that's possible anyway.

You cant blame him for trying, he has the interest he is willing to pay outlined somewhere in the thread. If I win the lottery I'll lend him the $20,000. Don't forget if I was to put my money in a savings account I'd get like 2% per year so from that POV this is a hell of a deal. Also loans in South Korea may have high interest rates, and may not be lending at this time.

Busy ATM.
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March 22, 2012, 05:39:53 PM
 #33

Matthew has answered this atleast 9001 times in this thread so I'm going to answer it for him this time.

He plans to get the BTC, convert to USD and use. Then every month (lets pretend hes repaying $500 a month) he'll take his repayment of $500, convert that to bitcoin at the price at that time, and pay.



So he might get a loan (for example) of 500BTC. He converts that to usd and gets $2500.

Next month, the price of BTC sky rockets to $10,000/btc. If he had a fixed BTC amount to repay, he'd now be fucked and have to repay $5,000,000 worth of BTC back, but because he's repaying at USD prices, he now only has to pay 0.25BTC back in total for the 500BTC loan.



So if bitcoin goes up or down, neither lendee or lender is affected, and lender can lend in BTC and lendee can repay in BTC. the loan is "hedged" on usd.

I do understand how that works, but consider that if the value of BTC went to $10kUSD, then I as a lender would have been better off simply holding my BTC and doing nothing. Technically I (probably) wouldn't lose purchasing power, but the opportunity cost would be a killer. I also dislike USD in general Tongue.

You cant blame him for trying, he has the interest he is willing to pay outlined somewhere in the thread. If I win the lottery I'll lend him the $20,000. Don't forget if I was to put my money in a savings account I'd get like 2% per year so from that POV this is a hell of a deal. Also loans in South Korea may have high interest rates, and may not be lending at this time.

I'm not blaming anyone for anything, that's just something I heard and was curious about. I also hear it's legal for them to send loansharks to your house to beat you up if you don't pay. I don't know that it's true but crazier things have happened.

Also, 2% per year is doing "well" for USD, but 2% per week is around the average I've seen for BTC, although it varies. If you're lucky enough to have an account at FirstPirate, you can get 4-7% per week, depending on how much coin you drop. At 2%/wk, that's 180%/y, and at 7% it's 3,270%/y, if you compound. Either number is pretty freakin insane, even at 33% BTC inflation for 2012.

That aside, dollar interest rates are pushed artificially low by the fed. Although I personally don't know much about getting international USD loans, if he could figure it out they should be around 5%, which would be doing way better than the 20% he was offering. I'm fairly certain he could beat 20% at any rate, which certainly isn't bad, and he'd have inflation on his side.

Most BTC loans are also short term, since it's better as a saving platform than as a debt platform. The USD is centrally planned (read: print) to favor debtors and allow for cheap long term mortgages and other artificial borrowing conditions, but saving in USD is a futile affair. USD favors instant gratification and bank ownership, while BTC favors delayed purchase and outright ownership. Ideally, you could borrow USD for the deposit, then stash the rent savings in a BTC bank Tongue. Eventually the interest from the BTC account would more than pay for rent.

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March 22, 2012, 07:02:37 PM
 #34


I do understand how that works, but consider that if the value of BTC went to $10kUSD, then I as a lender would have been better off simply holding my BTC and doing nothing. Technically I (probably) wouldn't lose purchasing power, but the opportunity cost would be a killer. I also dislike USD in general Tongue.

Well, what if it went down to $0.0000001/BTC? Obviously if you know 100% that the value of anything is going to go up, then you buy/hold it and don't trade it, unless you really have to. A loan is (almost) guaranteed profit for the lender, so long as you trust the lendee.


I'm not blaming anyone for anything

Lol. That was a figure of speech, not to be taken literally. I wasn't accusing you of blaming anyone.

I also hear it's legal for them to send loansharks to your house to beat you up if you don't pay

Most countries have those, they're also known as "debt collection agencies" Smiley

Also, 2% per year is doing "well" for USD, but 2% per week is around the average I've seen for BTC

I have a 3.25% savings account (taking into account taxes and not taking into account inflation). That 2% per week is money your lending to an unregulated bank of which you really have no idea what your money is actually being used for and what the risk really is, or is for a small short term loan to a person, which isn't going to accrue near as much interest and is something you can do with USD (see http://wonga.com - APR 4214%). The risk with this type of loan is extremely low because if Matthew can't afford to pay he can always move apartment and collect his deposit.

Ideally, you could borrow USD for the deposit, then stash the rent savings in a BTC bank

Thats assuming the USD banks are lending money, and also that your BTC bank isn't going to lose your money. What do you do when your BTC bank steals/loses your money? I'd like to see what a judge would say in court.

Also I'd love to see pirate's reaction if I brang 4000BTC to him. I don't think he or any other BTC bank has the capacity to take that on right now.

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March 22, 2012, 07:46:29 PM
 #35

Other than the interesting use of the character sting "brang", there are a few people that would take 4000 coins from you and pay interest.
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March 22, 2012, 07:52:05 PM
 #36

Well, what if it went down to $0.0000001/BTC? Obviously if you know 100% that the value of anything is going to go up, then you buy/hold it and don't trade it, unless you really have to. A loan is (almost) guaranteed profit for the lender, so long as you trust the lendee.
This.

I also hear it's legal for them to send loansharks to your house to beat you up if you don't pay
Uhh, no. The problem in Korea is not what's "legal" or "illegal", it's what's "enforced" and what's not "enforced". There are preferential treatment, corruption and lax laws here due to the fact that we are in a constant state of war with the North.


The risk with this type of loan is extremely low because if Matthew can't afford to pay he can always move apartment and collect his deposit.
Exactly. Why is this so hard to understand for people? I do admit though, $5k is not $20k. If I am loaned $20k and I defaulted for example, the most I am 'guaranteed' to get is $5k from the last apartment.

Thats assuming the USD banks are lending money
This is Korea. We don't borrow USD, we borrow KRW, and it is way harder to borrow in Korea than in the states. Also, they're racist. We've covered this.


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March 22, 2012, 08:01:11 PM
 #37

Well, what if it went down to $0.0000001/BTC? Obviously if you know 100% that the value of anything is going to go up, then you buy/hold it and don't trade it, unless you really have to. A loan is (almost) guaranteed profit for the lender, so long as you trust the lendee.
This.

I also hear it's legal for them to send loansharks to your house to beat you up if you don't pay
Uhh, no. The problem in Korea is not what's "legal" or "illegal", it's what's "enforced" and what's not "enforced". There are preferential treatment, corruption and lax laws here due to the fact that we are in a constant state of war with the North.


The risk with this type of loan is extremely low because if Matthew can't afford to pay he can always move apartment and collect his deposit.
Exactly. Why is this so hard to understand for people? I do admit though, $5k is not $20k. If I am loaned $20k and I defaulted for example, the most I am 'guaranteed' to get is $5k from the last apartment.

Thats assuming the USD banks are lending money
This is Korea. We don't borrow USD, we borrow KRW, and it is way harder to borrow in Korea than in the states. Also, they're racist. We've covered this.



I wouldn't take the questions personally. It's a lot of money, and you should expect to answer a lot more questions than the average loan to get it. Are you willing to disclose your personal finances (income, savings, etc.) to a prospective lender (in private, if you don't want to do it in public)?
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March 22, 2012, 08:02:31 PM
 #38

I wouldn't take the questions personally.
I don't. ^_^

Are you willing to disclose your personal finances (income, savings, etc.) to a prospective lender (in private, if you don't want to do it in public)?

Of course.

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March 22, 2012, 08:19:25 PM
 #39

Well, what if it went down to $0.0000001/BTC? Obviously if you know 100% that the value of anything is going to go up, then you buy/hold it and don't trade it, unless you really have to. A loan is (almost) guaranteed profit for the lender, so long as you trust the lendee.

Well, normally that wouldn't be a big issue, but it's the USD I don't trust Tongue. One of these days all the inflation the US has been exporting is going to come back and bite it where it hurts. I wouldn't want to have any investments in USD when that time comes.

Lol. That was a figure of speech, not to be taken literally. I wasn't accusing you of blaming anyone.
Tongue

Most countries have those, they're also known as "debt collection agencies" Smiley

Yeah but usually they're not allowed to beat you up and steal your stuff after a week of a 70% interest loan. Usually it requires some sort of legal action.

I have a 3.25% savings account (taking into account taxes and not taking into account inflation). That 2% per week is money your lending to an unregulated bank of which you really have no idea what your money is actually being used for and what the risk really is, or is for a small short term loan to a person, which isn't going to accrue near as much interest and is something you can do with USD (see http://wonga.com - APR 4214%).

Well, actually I've been digging through the lending forum to see what info I could dig up. I found out a lot about the lending criteria people are using, their accounting practices (or lack thereof), and the relative risk of default that they face. In general they see about 1 in 10 loans default, and usually for very small amounts so that it doesn't cause too much problem. I can already see a number of simple mistakes people are making that could be avoided as well. Basically, the problems faced with BTC banking are no different from any other free-market bank, and the same universal principles of banking apply. Either when doing lending yourself or when choosing a bank, the same criterion for what "good" is apply.

Also, I haven't seen anyone throwing a fit about pirate, and he's been running insane interest rates and been going at it for a while now. There's also several other individual bankers, and I haven't seen very many complaints at all about not getting interest payments, or for any other reason. Business seems to be good enough.

I'd never heard of Wonga or anything like that. That's pretty insane. However, personally I'd rather deal with the challenges of the unsupported free market and come up with solutions myself than to rely on government control to make my business work. The world will never evolve if nobody steps up to come up with new solutions.

The risk with this type of loan is extremely low because if Matthew can't afford to pay he can always move apartment and collect his deposit.

His risk level isn't really a factor. See above.

Ideally, you could borrow USD for the deposit, then stash the rent savings in a BTC bank

Thats assuming the USD banks are lending money, and also that your BTC bank isn't going to lose your money. What do you do when your BTC bank steals/loses your money? I'd like to see what a judge would say in court.

Also I'd love to see pirate's reaction if I brang 4000BTC to him. I don't think he or any other BTC bank has the capacity to take that on right now.

Maybe, you won't know till you look. As for bank capacity, you may be right. Current BTC banks are very primitive, and generally don't have the automation capacities to handle a lot of depositors or borrowers. If you know how to screen borrowers, you could lend yourself and probably manage it. However, I think the case for BTC banks stealing your coin or blowing up is overblown. Apparently, at one time when everyone was inexperienced and BTC was new, things were much less reliable, but I don't see that much today. The worst I've seen is the WBX collapse, which failed only on the AUD side, and is being liquidated much more responsibly than, say, MF Global or Lehman.

Uhh, no. The problem in Korea is not what's "legal" or "illegal", it's what's "enforced" and what's not "enforced". There are preferential treatment, corruption and lax laws here due to the fact that we are in a constant state of war with the North.

That makes better sense. Not terribly uncommon around the world, either.

Oh, and for the record, I was only curious x.x. I'm not Mr. D. Pockets, nor am I trying to argue with anyone lol.

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