Loans in BTC

[tee-rex]

deflation is terrible for loans.  If you borrow 1 BTC and have to pay back 1.25 BTC (due to interest) plus the price of house goes down due to deflation.  You'll always be losing money.  Its only good for the lenders

Loans by definition must always lose money...

Lol

Anyway, if you're borrowing BTC, when the exchange rate settles, the interest rates will likely be lower than if the currency was constantly being inflated. It won't be 0%, but it will likely be quite low.

Loans do not always lose money, but when the price of the unit of measure goes up it hurts the borrower and helps the lender in terms of fiat.

Generally speaking it is not a good idea to borrow in bitcoin unless you plan on using your borrowed funds to pay for some income generating asset that will generate bitcoins.

Actually, it doesn't make much difference whether you borrow in a depreciating currency (fiat) or an appreciating one (Bitcoin). What really makes all the difference is the real interest you pay on a loan since in both cases you pay more later than you borrow today in inflation-deflation adjusted prices.

It really does matter. If you borrow in something other then the kind of income it will produce then you are going to have an exchange rate risk. This is true for all types of assets. For example if you borrow dollars so you can build/invest in something that will produce gold then you will risk that the price of gold in terms of dollars will fall. The same is true with bitcoin; if you borrow bitcoin for something that will produce dollars, you take the risk that bitcoin will rise in value in relation to dollars.

What you say is true, but this is not relevant to my post (well, and my post isn't strictly relevant to the post I replied either, but relevant to the inside posts). I was assuming (as per OP) that BTC had become "the currency that people rely on". From this point, my assertion stays correct, since it is assumed that people get income in bitcoins.

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[oceans]

Bitcoins in my opinion is really not the right currency to be able to allow loans. I personally feel that trying anything like this with bitcoins could lead to a lot more ways to end up being scammed.

[Razick]

Say BTC does become the currency that people rely on.  How would a loan system work?  I would imagine people would still need to take out loans for large purchases, such as cars and houses.

Without a credit system how does something like that play out?  Would credit cards in BTC exist, and you still received a credit score that allowed you to take out money for a house?  The fluctuation of the BTC price definitely makes it difficult for that model to work. 

I am all about Bitcoins, but I can't seem to wrap my head around this part of society that exists, and is still required with our current mentality.

Not sure if this is the right location for this, but I figured this would be a good place to start.

It is literally no different than cash with regards to loans. Sure theoretically someone could run off with Bitcoin... but, the same could be said for cash loans. It's all about credit scores. Someone with a $25,000 credit could refuse to repay, but over time they've proven that unlikely. The same will go for Bitcoin. No one is going to loan you 10,000 BTC anonymously, but if you stake your credit or collateral on it, they may.

[polynesia]

Say BTC does become the currency that people rely on.  How would a loan system work?  I would imagine people would still need to take out loans for large purchases, such as cars and houses.

Without a credit system how does something like that play out?  Would credit cards in BTC exist, and you still received a credit score that allowed you to take out money for a house?  The fluctuation of the BTC price definitely makes it difficult for that model to work.  

I am all about Bitcoins, but I can't seem to wrap my head around this part of society that exists, and is still required with our current mentality.

Not sure if this is the right location for this, but I figured this would be a good place to start.

It is literally no different than cash with regards to loans. Sure theoretically someone could run off with Bitcoin... but, the same could be said for cash loans. It's all about credit scores. Someone with a $25,000 credit could refuse to repay, but over time they've proven that unlikely. The same will go for Bitcoin. No one is going to loan you 10,000 BTC anonymously, but if you stake your credit or collateral on it, they may.

Would a default on a bilateral BTC loan mess up a person's credit score?
If not, then a person with a good credit score might also refuse to pay...

[Razick]

Say BTC does become the currency that people rely on.  How would a loan system work?  I would imagine people would still need to take out loans for large purchases, such as cars and houses.

Without a credit system how does something like that play out?  Would credit cards in BTC exist, and you still received a credit score that allowed you to take out money for a house?  The fluctuation of the BTC price definitely makes it difficult for that model to work.  

I am all about Bitcoins, but I can't seem to wrap my head around this part of society that exists, and is still required with our current mentality.

Not sure if this is the right location for this, but I figured this would be a good place to start.

It is literally no different than cash with regards to loans. Sure theoretically someone could run off with Bitcoin... but, the same could be said for cash loans. It's all about credit scores. Someone with a $25,000 credit could refuse to repay, but over time they've proven that unlikely. The same will go for Bitcoin. No one is going to loan you 10,000 BTC anonymously, but if you stake your credit or collateral on it, they may.

Would a default on a bilateral BTC loan mess up a person's credit score?
If not, then a person with a good credit score might also refuse to pay...

I don't know how credit scores work, so it may or may not work that way right now, although I think it does as long as it's done right, but presumably in the future it will for sure assuming Bitcoin becomes more mainstream.

Keep in mind that there is also civil liability involved. As long as a person's real identity is tied to a loan, and the loan is large enough to be worth it, they could be taken to court if they refuse to pay. Even if they refuse to pay or declare bankruptcy I'm pretty sure either one of those actions would (severely) harm their credit score.

[michaelwang33]

Bitcoins in my opinion is really not the right currency to be able to allow loans. I personally feel that trying anything like this with bitcoins could lead to a lot more ways to end up being scammed.

This is very true because it is impossible to force someone to repay a loan using bitcoin. The closest thing you can do to forcefully recover your loaned bitcoin would be to get a judgment on the borrower (if you know his real identity) and have the courts seize his fiat assets and convert that fiat back into btc.

[kutaka]

Bitcoins in my opinion is really not the right currency to be able to allow loans. I personally feel that trying anything like this with bitcoins could lead to a lot more ways to end up being scammed.

I cannot really agree with that.

Bitcoin is as good for loans as fiat. All you need is borrower identity and legal agreement.

[Mobius]

Bitcoins in my opinion is really not the right currency to be able to allow loans. I personally feel that trying anything like this with bitcoins could lead to a lot more ways to end up being scammed.

This is very true because it is impossible to force someone to repay a loan using bitcoin. The closest thing you can do to forcefully recover your loaned bitcoin would be to get a judgment on the borrower (if you know his real identity) and have the courts seize his fiat assets and convert that fiat back into btc.

I think this is a very big problem that will prevent the BTC lending economy from ever taking off. The fact that a lender essentially cannot force a borrower to repay his debt when he has the ability to do so will prevent the lender from wanting to lend in the first place and will cause interest rates to be higher then other potential sources of credit.

[100000000sat]

Bitcoins in my opinion is really not the right currency to be able to allow loans. I personally feel that trying anything like this with bitcoins could lead to a lot more ways to end up being scammed.

Why? It's money. BTC

You can walk away from a loan in fiat. Easy.

Lenders of fiat currency aren't protected from making bad investments by some sort of magic. They critique and analyze the data submitted by applicants for loans and verify their ID. This system would work for Bitcoin. It would work for any sort of cryptocurrency. It's just a payment method.

[Mobius]

Bitcoins in my opinion is really not the right currency to be able to allow loans. I personally feel that trying anything like this with bitcoins could lead to a lot more ways to end up being scammed.

Why? It's money. BTC

You can walk away from a loan in fiat. Easy.

Lenders of fiat currency aren't protected from making bad investments by some sort of magic. They critique and analyze the data submitted by applicants for loans and verify their ID. This system would work for Bitcoin. It would work for any sort of cryptocurrency. It's just a payment method.

If a borrower was to walk away from paying a loan then the lender can sue the borrower for payment and if they win a judgment against the borrower then the lender can seize a borrower's assets. It is not possible to seize someone's bitcoin if they hold/control the private keys.

[tee-rex]

Bitcoins in my opinion is really not the right currency to be able to allow loans. I personally feel that trying anything like this with bitcoins could lead to a lot more ways to end up being scammed.

Why? It's money. BTC

You can walk away from a loan in fiat. Easy.

Lenders of fiat currency aren't protected from making bad investments by some sort of magic. They critique and analyze the data submitted by applicants for loans and verify their ID. This system would work for Bitcoin. It would work for any sort of cryptocurrency. It's just a payment method.

If a borrower was to walk away from paying a loan then the lender can sue the borrower for payment and if they win a judgment against the borrower then the lender can seize a borrower's assets. It is not possible to seize someone's bitcoin if they hold/control the private keys.

But it is still possible to put this person in jail, right? So it seems not much different from loans in fiat as long as you can reach the borrower.

[Asianconnect]

Say BTC does become the currency that people rely on.  How would a loan system work?  I would imagine people would still need to take out loans for large purchases, such as cars and houses.

Without a credit system how does something like that play out?  Would credit cards in BTC exist, and you still received a credit score that allowed you to take out money for a house?  The fluctuation of the BTC price definitely makes it difficult for that model to work. 

I am all about Bitcoins, but I can't seem to wrap my head around this part of society that exists, and is still required with our current mentality.

Not sure if this is the right location for this, but I figured this would be a good place to start.

This is very interesting question to discuss now that I've read this thread I also wonder how will it works in the future.

[Fray]

Bitcoins in my opinion is really not the right currency to be able to allow loans. I personally feel that trying anything like this with bitcoins could lead to a lot more ways to end up being scammed.

Why? It's money. BTC

You can walk away from a loan in fiat. Easy.

Lenders of fiat currency aren't protected from making bad investments by some sort of magic. They critique and analyze the data submitted by applicants for loans and verify their ID. This system would work for Bitcoin. It would work for any sort of cryptocurrency. It's just a payment method.

If a borrower was to walk away from paying a loan then the lender can sue the borrower for payment and if they win a judgment against the borrower then the lender can seize a borrower's assets. It is not possible to seize someone's bitcoin if they hold/control the private keys.

But it is still possible to put this person in jail, right? So it seems not much different from loans in fiat as long as you can reach the borrower.

The penalty for not paying a debt is not jail. Loans are a civil matter, not criminal. As long as you did not willfully deceive the lender when you took out the loan (for example by forging income documents) then you will have zero chance of jail if you don't pay a loan.

[Razick]

Bitcoins in my opinion is really not the right currency to be able to allow loans. I personally feel that trying anything like this with bitcoins could lead to a lot more ways to end up being scammed.

Why? It's money. BTC

You can walk away from a loan in fiat. Easy.

Lenders of fiat currency aren't protected from making bad investments by some sort of magic. They critique and analyze the data submitted by applicants for loans and verify their ID. This system would work for Bitcoin. It would work for any sort of cryptocurrency. It's just a payment method.

If a borrower was to walk away from paying a loan then the lender can sue the borrower for payment and if they win a judgment against the borrower then the lender can seize a borrower's assets. It is not possible to seize someone's bitcoin if they hold/control the private keys.

That's true, but then again if your only assets are Bitcoins, then 1) you probably can't get a large loan to begin with and 2) what's the point? Are you going to sell everything you own for Bitcoin and know that you can never buy a house or a car because of your outstanding debt?

[tee-rex]

Bitcoins in my opinion is really not the right currency to be able to allow loans. I personally feel that trying anything like this with bitcoins could lead to a lot more ways to end up being scammed.

Why? It's money. BTC

You can walk away from a loan in fiat. Easy.

Lenders of fiat currency aren't protected from making bad investments by some sort of magic. They critique and analyze the data submitted by applicants for loans and verify their ID. This system would work for Bitcoin. It would work for any sort of cryptocurrency. It's just a payment method.

If a borrower was to walk away from paying a loan then the lender can sue the borrower for payment and if they win a judgment against the borrower then the lender can seize a borrower's assets. It is not possible to seize someone's bitcoin if they hold/control the private keys.

But it is still possible to put this person in jail, right? So it seems not much different from loans in fiat as long as you can reach the borrower.

The penalty for not paying a debt is not jail. Loans are a civil matter, not criminal. As long as you did not willfully deceive the lender when you took out the loan (for example by forging income documents) then you will have zero chance of jail if you don't pay a loan.

This was a metaphor. You can always make someone's life unbearable even without throwing them into a prison cell.

[semizias]

I guess the problem is trust with BTC as well as controlability.
Since everything is so anonymous it's hard to force someone to do something.
This is also why scams happen more with BTC then with most / any other currency.

For example: with Paypal you can dispute a transaction, with bitcoin you can't.
This way I lost 0.17 BTC myself when trying to exchange it to Paypal

[tee-rex]

I guess the problem is trust with BTC as well as controlability.
Since everything is so anonymous it's hard to force someone to do something.
This is also why scams happen more with BTC then with most / any other currency.

For example: with Paypal you can dispute a transaction, with bitcoin you can't.
This way I lost 0.17 BTC myself when trying to exchange it to Paypal

You likely never heard what Paypal is notorious for (hint: there is a thread on this forum about it, just search).

[Fray]

Bitcoins in my opinion is really not the right currency to be able to allow loans. I personally feel that trying anything like this with bitcoins could lead to a lot more ways to end up being scammed.

Why? It's money. BTC

You can walk away from a loan in fiat. Easy.

Lenders of fiat currency aren't protected from making bad investments by some sort of magic. They critique and analyze the data submitted by applicants for loans and verify their ID. This system would work for Bitcoin. It would work for any sort of cryptocurrency. It's just a payment method.

If a borrower was to walk away from paying a loan then the lender can sue the borrower for payment and if they win a judgment against the borrower then the lender can seize a borrower's assets. It is not possible to seize someone's bitcoin if they hold/control the private keys.

But it is still possible to put this person in jail, right? So it seems not much different from loans in fiat as long as you can reach the borrower.

The penalty for not paying a debt is not jail. Loans are a civil matter, not criminal. As long as you did not willfully deceive the lender when you took out the loan (for example by forging income documents) then you will have zero chance of jail if you don't pay a loan.

This was a metaphor. You can always make someone's life unbearable even without throwing them into a prison cell.

Even this would be very difficult to do with the anon nature of bitcoin. People can and do easily use VPNs and socks5 proxies to hide their true identity and most people now are not willing to "show" their ID when taking out a loan (if they do show their ID it is likely to someone else). If you were to make someone's life hell then it would likely be for the wrong persona and regardless of it is for the right person or not you would likely be breaking debt collection laws which you can get in more trouble for then it is worth (read potential 6 figure fines due to the borrower).

[zedicus]

I guess the problem is trust with BTC as well as controlability.
Since everything is so anonymous it's hard to force someone to do something.
This is also why scams happen more with BTC then with most / any other currency.

For example: with Paypal you can dispute a transaction, with bitcoin you can't.
This way I lost 0.17 BTC myself when trying to exchange it to Paypal

This is a very big reason why it is not safe to use paypal period. But it is especially not safe to use paypal with bitcoin. Not only is it possible to have a PP transaction reversed if you are dealing with the legit owner of the account, but paypal accounts are notorious for getting hacked and when they do, whoever money was sent to by these stolen paypal accounts would be on the hook for the money that was sent them.

[maker88]

The price of housing is artificially high because of the whole credit industry.

Before mortgages, you'd have people building their own houses on land they claimed as their own. A homestead. So I think in an ideal world we'd go back to that sort of thing, or something completely new.

https://www.youtube.com/watch?v=Y4WmDoYJhnk

I certainly don't want loans in bitcoin, unless they're non-interest loans - that's where the monetary oppression in the world comes from.

in some areas the price of housing isn't very much at all. in places like cleveland, buffalo, chicago, you can get like a 4bed 2bath house for $30k. but then in boston the same house is 2.3 million