Interest on interest

[boarderbloke]

riders2010,,,This "Kid has lucked out with a lawyer", maybe for now. Think he'll be buying any inputs from that retailer again? maybe if it's cash on the barrel, or a credit card swipe on the spot, or approved bank credit, otherwise I don't see him ever leaving that retailers yard with chemical, and not paying first. How far of a drive to the next retailer?? Oh ya, the word will spread on that kid too, and other retailers will hear the news PDQ. Alot of retalers have been stung over the years, and as a purchaser of inputs, I hate seeing my prices go up because some flunkie stiffs a retailer and that same retailer trys to recoup his losses on the back of the good paying customers.

The "kid" should've sold more canola at $14.50 this fall and payed his bill on time, he'd have better credit and a better reputation!

Really! how bright is this "kid"??? Even if he didn't think the interest was going to be compounded, it had to aleast be obvious that the interest would mount to 24% over the period of a year!!! or did he think he was getting a cheap loan at 2% for the year, I'm just wondering.

riders2010, just wondering what kind of terms, do you think the lawyer, will give "this kid"?

[riders2010]

This kid is probably like alot of other kids wanting to farm that don't have mom and dads backing.

As for his canola it was invigor and was shit but even though it was shit it blew and ended up in some of my trees and mixed up with many others canola all over the country side. So not much to sell at all.

So tell me who took more risk the kid or the input supplier? The input supplier will get his money one way or another. And after he adds his 30% to the already what 60 70% mark up wow what a loss what a pillar of society and what a low life that kid is for even attempting hey? What will the kid end up with for taking the real risk?

[riders2010]

coleville the agreement was 2% not equivilant to 30%. Although I am sure like most farmers he was thinking of how good the prices are and of getting a decent crop where even getting hosed by 30% would have been do able.

I cannot for the life of me believe people think that level of interest is acceptable given the bank rate????

And as far as my example not comparable the minute we farmers sign a contract we do not own anything except more risk in insuring that we provide the product, if it spoils etc we have to make up the contract. And while I am waiting for my money I am paying interest on my bills too or foregoing money that I could have made on the next investment. How stupid and one sided is that? Why am I not entitled to interest? I provided the grain they have a blurp where they cannot provide the money just like the kid so what is different?

[Hopperbin]

27 to 30 percent is only 3 percent interest yet on a 100 thousand dollar bill its 3000 per year extra instead of 27000 it was supposed to be. Not sure where you farm but I have quite a few retailers where I am from and if I do not trust them for a spraying charge or fert application fee etc I would ask before hand what is the cost and go elsewhere. What is the lawyer fee, maybe 10 grand up front? Hopefully the interest is 5 percent per year not 5 percent per month, wow that would suck royally. What about his land rent? Etc. On the other hand when we sell our grain we should be taking a down payment which could allow the buying to walk leaving his down payment at least when we sell to the Vittera ect we don't have to deal with waiting a year for payment and wondering if its coming.

[sumdumguy]

The trouble with credit is that "outstanding
balance" phrase. Best to sell enough to square
up your accounts, but as we all know, there can
be crop failures and short crops that make that
pretty tough. Gotta figure that into the equation
when you sign on for the debt.

[riders2010]

2 more farmers stepped forward today contacting the kid with same thing done to them. Would imagine if everyone steps forward and interest gets reverted back could be a chunk of change? Pretty sure but not certain but I think one of those guys may have lost land to the supplier previously, wouldnt that be a mess to sort out?

[LEP]

Rider2010, I think as stated before the interest does not
drop to 5% until it is in judgement and only from that
point forward, not back to the start of the A/R.

I have seen many of these accounts accrue interest at 2%
per month over my banking career go through all stages
of collection and legal process, not one was adjusted by a
judge. However many were negotiated down upon some
form of payment. It is simply leverage to get paid.

I have however seen way too many lawyers tell
prospective clients what they want to hear, get a retainer
and burn through a pile of client's cash defending stupid
positions.

Get a second opinion from a reputable law firm.

[charliep]

One of the issues may be that on many types of high interest payment, a borrower losses the interest free period from the time of purchase to the due date on the first payment. Example, you purchased something on October 1st and missed the payment on November 1st. Your interest starts on October 1st when you made the purchase, not November 1st when you missed the payment.

I am sometimes amazed (past life) at some farmers with high interest debt and crop inventory in the bin unsold. You have to be really bullish to pay this type of carry. At least in the new world, you can get fully paid for wheat on delivery and reduce your debt.

[charliep]

From the old days, I remember people who had interest free periods from seeding to the fall, missed their fall payment and paid the full high interest rate bill May to October. That is how a lot of zero interest rate consumer credit works with the assumption some people are stupid enough to miss payments and have the loan revert to a high rate from zero.

[Hopperbin]

Riders can you explain to me how someone would put up land to a supplier which should have been mortgaged to a bank? Something does not add up here.

[Hopperbin]

Been a long time since our credit union took ownership of land because owner was unable to make payments. Then it went to the highest bidder and the credit union would make money on it, don't think they ever lost money cause they could always sell for more than was owed. Anyways some bits of useless info.

[ColevilleH2S]

Hopper I took that statement to mean that the retailer was also in the farming/landownership game, and purchased some land out from under their customer.

That was just my take anyways.

[gustgd]

A good info graphic on high interst rates.

http://www.cracked.com/funny-4179-credit-cards/

Take away is just pay your bills.