Interest on interest

[wd9]

I believe it is only a mortgage is calculated semi
annually not in advance. The rest is open season
to be as short as possible. If it says 2 percent per
month that is your compound period.

100 becomes 102 at day 31. Next month it's
104.04. Interest on interest. They have told you
the compound rate and hid nothing.

[dmlfarmer]

Credit issuers often resort to the phase "On Outstanding Balance" to get around having to detail compounding on invoices. If the terms of the account says 2% interest monthly and the interest is not paid at the end of the month is automatically becomes part of the outstanding balance thus is subject to interest charges.

As far as a 2% rate being too high, or loan sharking - this is just another example of the deregulation of our financial system. Governments have turned a blind eye to financials and consumers are subject to whatever interest charges a company believes the market can bear. If you want to really see exorbiant "legal" interest rates (and charges), just look at what some of the payday loan companies charge the really poor who simply need a few bucks for groceries to make it to there next cheque.

On the question of paying more than 30% annually even though the stated interest rate is 2% monthly, is there a minimum payment due each month? Some credit issuers charge a penaltly if a minimum payment is not covered. Utility companies are prime examples of this whereby if a payment is not made by a certain date, a penalty is charged.

I do not condone what this business is charging but at the same time I doubt there is little legal recourse if the farmer knew the terms of credit when he made the purchase (which by the sounds of it he did.) Just another example of how little protection our society provides those of society who most need it.

[vvalk]

What going on here on this thread. Everyday
single business in this country charges around 2%
per month, which means compounded, on
outstanding accountsc. Check your local napa or
co-op, pricess auto or whereever. doesnt matter
what industry. This is pretty simple stuff. Your 2%
get added to your bill after 1 month and then is
charged 2% on the new balance the next month.
What is a lawyer going to tell you? Take the
money your going to spend on the lawyer and pay
your bill down. Most loans at the bank are done
this way just that you actually pay the interest
every month so your balance doesnt increase and
therefore you don't pay interest on that the next
month.

[Hopperbin]

Don't know all the particulars here but have to side with the dealer. The farmer should not be in that position of not being able to pay off his monthly bill. If the farmer cannot use his financial institution for credit to pay all the bills then the farmer is extremely high risk. Why don't you give this young family the credit if your so pissed off and find out where you sit when you don't get paid.

[Burbert]

Criminal rate of interest in Comedia is
61% according to the Crime Code of
Comedia, so 30% is just angribusiness
doing well business. Yeah ya should
always read the f'n fine print. Get a
telescope and be prepared ta spend a day
er so reading, the legalise sh=t printed
on each and every invoice ya get. In
fact there would no longer be time ta
frame. Retire, sell the fram and enjoy
life ta the fullest.........

[riders2010]

Hopper why don't you kiss my ass if your interested !!!!

As a matter of fact the lawyer he talked to stated anything over 24% is gonna revert the interest to 5%.

Also charged him double for chemical sprayed and would not revert it back a real prick.

When bank rate is what it is this is loan sharking.

How many young guys are able to farm without some credit? And when they get into trouble to take advantage may be in the eyes of the law okey but is immoral otherwise.

[sumdumguy]

Rider, keep us posted. Perhaps we all will learn
about loan sharking. Good lesson though, pay up
your accounts as soon as possible.

I dont know the circumstances, but this was a
lesson we learned in the early eighties when
interest was over 20%.

[stubblejumper]

The only reason someone would pay 24% intrest is they could not get a loan or line of credit from a financial institution at 1 or 2 above prime.

[wd9]

FV = PV × (1 r)to power of n

where FV = Future Value
PV = Present Value =$1000
r = interest rate = 2%
n = number of periods = 12

FV = 1000 x (1 .02) to the 12th

FV = $1000 x 1.268
FV = $1268

So, annualized interest rate is 26.8%.

If he is being charged more than that
and is unfamiliar with a calculator,
money spent on an accountant who will
explain his bill to him would be better
than a lawyer.

[ColevilleH2S]

I don't know about the 30% part but the reason retailers charge 2% compounded monthly is that THEY DON'T WANT TO BE YOUR BANKER. If someone didn't pay me for 30 days I'd resort to this kinda stuff too. Tell the guy to find a bank or credit union and get a running line of credit. Or if that is not an option, find a different retailer who will give credit on better terms (they are out there).

[wd9]

Oh and if you wanna do it backwards:

PV = FV / (1 r)to power n

So you can determine what the original
value was if you know todays bill (FV) the
monthly rate (2% or .02 in formula) and
number of months back (n).

[vvalk]

Rider. What is the problem? I am honestly trying
to figure it out. When you buy anything from any
business, it states on the bottom of every bill that
unpaid balances get charged 2% interest per
month. Not agribusiness, any business in this
country. 2% per month means if you don't pay that
month 2% get added to your bill. Then you pay
2% on that new bill the next month. So yes if you
don't pay your bill for an entire 12 months you
would pay 27% or whatever. It's pretty simple
really, isn't it?