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But one forgets that even though the interest rate is 0% the COST of the loan is !=0, we still have to pay a "bidragsssats" which is an "administrative fee" to
by tveyben 6y ago
But one forgets that even though the interest rate is 0% the COST of the loan is !=0, we still have to pay a "bidragsssats" which is an "administrative fee" to have the loan
The interesting part is that that this rate can be changed over time to whatever the lone-shark wants it to be, thus - as always - you need to look at the TCO.
ÅOP as it is in danish: "Årlig Omkostning i Procent" - aka the Yearly cost in percent...
- SilasX 6y agoYeah, that's what I figured. Which I why I was pleasantly surprised to learn (at least according to an HNer in the know) that, in the UK at least, rates must be expressed in a way that accounts for all fees -- so something like this couldn't be called 0%. https://news.ycombinator.com/item?id=11082905 https://news.ycombinator.com/item?id=11082905
- ashtonkem 6y agoHonesty in advertising laws are really a wonderful thing.
- beerandt 6y agoIn the US, this is basically why APR =/= APY. Where APR is the effective rate including fees.
- pkaye 6y agoI though APY is just APR with interest compounding.
- foobarian 6y agoThere is definitely a difference between APR and the nominal interest rate of a loan. APY is the same as APR if the compounding happens once a year.
- beerandt 6y agoNot if there are fees or points charged by the bank for the loan. They must be included in calculating apr.
- dcolkitt 6y agoI'm curious why this hasn't been competed away. Short-term rates in Denmark are -0.6%. Couldn't banks just borrow short, write mortgages at 0% and pocket 60 basis points? It's a little screwy, because you're getting paid the lenders instead of the borrowers. But it's still fundamentally no different than a bank that borrows at 2.5% and writes mortgages at 3% APR.
- im3w1l 6y agoIt's very different, because it means you don't need the borrower to ever pay back. Meaning the banks will give loans to anyone the laws can be bent to allow lending to.
- eloff 6y agoThat doesn't make logical sense to me. The back would still lose the principal if you defaulted right? Doesn't matter the interest rate.
- im3w1l 6y agoThe customer can't default if there is no interest, so just let the debt remain on the books forever. Well, I suppose you could take a loss if your customer dies, and the estate is insolvent.
- eloff 6y agoIf you're not making the monthly payments then that's still a default. I don't see how the interest changes anything. I guess you could argue if the bank is not paying interest on that money, then they won't lose anything if the client is in default. I think there's probably still opportunity costs to the bank in that case - they could be loaning that money to a client that pays additional fees and makes the payments on time. But I imagine they would still foreclose and sell the asset to recover the principal in that case. Which might turn a profit for them.
- wcoenen 6y ago
- xorcist 6y agoSo how much is the effective rate, typically?
- KSteffensen 6y agoThe 'bidragssats' on my mortgage is currently at 0.7160%. This is a 15 year mortgage at 1% interest so effect rate is 1.71%. If I was to refinance to a 30 year mortgage with the same bank/mortgage lender this quarter I would get a 0.5% mortgage with 'bidragssats' at 0.6812% so around 1.18% effective rate. This would also increase my principal by ~30000 DKK or around $5000.
- apta_ 6y agoSo it is still a usurious loan. Nothing to see here.