4 ms·

Only interest, not payments? Better than nothing

lostapathy 7y ago
There are already systems in place to defer payments on student loans if you are unemployed or otherwise unable to pay. Normally doing so still accrues interest - I assume under the announced plan you'll continue to be able to do that, but not accrue more interest.
WalterBright 7y ago
Mortgage interest rates dramatically affect the price of a house. House payments for the first few years are nearly all interest. It's a LOT better than nothing. A car lot salesman told me once that the dealerships don't make money selling cars - they make the money selling financing, i.e. the interest. Consider that when saying "better than nothing".
- droithomme 7y ago
  > A car lot salesman told me once that the dealerships don't make money selling cars - they make the money selling financing. I believe it. I prefer to pay cash for cars, and it is extremely difficult to purchase new cars for cash at many dealerships. They don't like it and will do things like refuse to honor advertised prices.
  - LynxInLA 7y ago
    That's why a lot of people do financing, pay the first monthly payment so that the seller/financer gets their kickback, and then pay off the rest of the loan on day 31.
    - wingspar 7y ago
      I don’t even do that. Bought the last car in a Friday with their fiancé guy matching my credit union rate. Went in to th credit union on Monday and refinanced the loan, paying off the loan from the dealer. The dealer wanted over twice what the credit union wanted for GAP insurance.
      - deleted 7y ago
        [deleted]
    - to11mtm 7y ago
      In some cases if you pay it off in less than 3-6 months the kickback doesn't happen. Of course, there's nothing they can do at that point...
  - lonelappde 7y ago
    Why buy a new car?
- nwallin 7y ago
  This is absolutely true. Pro tip. If you're buying a car with cash, decline to state how you're paying for it until you have already negotiated the price and gotten it in writing. They will ask. Tell them you'll work out finances with their finance person. If you tell them you're paying in cash before you have the price in writing, your price negotiations will go poorly.
  - deleted 7y ago
    [deleted]
  - monksy 7y ago
    https://www.youtube.com/watch?v=gLxVyeFmod8 https://www.youtube.com/watch?v=gLxVyeFmod8
- seanmcdirmid 7y ago
  But low interest rates also allow more leverage to be brought to bear in a bidding war...ultimately causing housing prices to rise. There is no free lunch.
- qes 7y ago
  > It's a LOT better than nothing. That's quite a stretch. People won't see a realized benefit for years, even decades. And with this being a temporary measure, 3-6 months of no interest doesn't amount to very much - maybe a few thousand for people with somewhat larger loan amounts that are also all federal.
  - WalterBright 7y ago
    > People won't see a realized benefit for years, even decades. This is how people get seduced into being eaten alive by interest payments, and how lenders make a fortune. Understanding compound interest and the time value of money is a big part of how people move up financially, and how not understanding it leaves people at the bottom tiers. For example, that mere "few thousand" can be applied to buy down the principle, which will have a sustained benefit to you for the life of the loan, and you'll pay it off much earlier.
gonational 7y ago
They’ve just made it 100% free (no interest OR payments) to spend your first four years after high school doing actual work and learning actual skills, instead of drinking while continuing 4-6 more years of high school.

There are already systems in place to defer payments on student loans if you are unemployed or otherwise unable to pay. Normally doing so still accrues interest - I assume under the announced plan you'll continue to be able to do that, but not accrue more interest.

WalterBright 7y ago

Mortgage interest rates dramatically affect the price of a house. House payments for the first few years are nearly all interest. It's a LOT better than nothing. A car lot salesman told me once that the dealerships don't make money selling cars - they make the money selling financing, i.e. the interest. Consider that when saying "better than nothing".

droithomme 7y ago
> A car lot salesman told me once that the dealerships don't make money selling cars - they make the money selling financing. I believe it. I prefer to pay cash for cars, and it is extremely difficult to purchase new cars for cash at many dealerships. They don't like it and will do things like refuse to honor advertised prices.
- LynxInLA 7y ago
  That's why a lot of people do financing, pay the first monthly payment so that the seller/financer gets their kickback, and then pay off the rest of the loan on day 31.
  - wingspar 7y ago
    I don’t even do that. Bought the last car in a Friday with their fiancé guy matching my credit union rate. Went in to th credit union on Monday and refinanced the loan, paying off the loan from the dealer. The dealer wanted over twice what the credit union wanted for GAP insurance.
    - deleted 7y ago
      [deleted]
  - to11mtm 7y ago
    In some cases if you pay it off in less than 3-6 months the kickback doesn't happen. Of course, there's nothing they can do at that point...
- lonelappde 7y ago
  Why buy a new car?
nwallin 7y ago
This is absolutely true. Pro tip. If you're buying a car with cash, decline to state how you're paying for it until you have already negotiated the price and gotten it in writing. They will ask. Tell them you'll work out finances with their finance person. If you tell them you're paying in cash before you have the price in writing, your price negotiations will go poorly.
- deleted 7y ago
  [deleted]
- monksy 7y ago
  https://www.youtube.com/watch?v=gLxVyeFmod8 https://www.youtube.com/watch?v=gLxVyeFmod8
seanmcdirmid 7y ago
But low interest rates also allow more leverage to be brought to bear in a bidding war...ultimately causing housing prices to rise. There is no free lunch.
qes 7y ago
> It's a LOT better than nothing. That's quite a stretch. People won't see a realized benefit for years, even decades. And with this being a temporary measure, 3-6 months of no interest doesn't amount to very much - maybe a few thousand for people with somewhat larger loan amounts that are also all federal.
- WalterBright 7y ago
  > People won't see a realized benefit for years, even decades. This is how people get seduced into being eaten alive by interest payments, and how lenders make a fortune. Understanding compound interest and the time value of money is a big part of how people move up financially, and how not understanding it leaves people at the bottom tiers. For example, that mere "few thousand" can be applied to buy down the principle, which will have a sustained benefit to you for the life of the loan, and you'll pay it off much earlier.

gonational 7y ago

They’ve just made it 100% free (no interest OR payments) to spend your first four years after high school doing actual work and learning actual skills, instead of drinking while continuing 4-6 more years of high school.