5 ms·

I don't understand, how do you end paying 150% of the principal loan if it's zero interest?

by nemothekid 5y ago

shagie 5y ago
You can either spend $20k up front for the bootcamp, or pay $30k as part of an ISA over 5 years.
- willcipriano 5y ago
  That just sounds like interest with extra steps.
  - getcrunk 5y ago
    actually its interest with the least amount of steps. Amount due isn't variable and no compounding.
  - imtringued 5y ago
    Non compounding interest? I think there is a better word for this.
    - btdmaster 5y ago
      https://en.wikipedia.org/wiki/Interest#Simple_interest https://en.wikipedia.org/wiki/Interest#Simple_interest
      - rootusrootus 5y ago
        Still has a time component, though. A flat 50% that is due whether you pay it off in 1 month or 60 months is a fee, not interest.
    - ummonk 5y ago
      The term is “fee”. It’s a 50% lending fee.
  - TuringNYC 5y ago
    It is a static markup but not interest, as interest varies with time and is dynamic. This is a markup regardless of time.
vxNsr 5y ago
Because it’s an income share agreement, so whether you land a job making $100k or $51k you still owe 10% of your income to this company for 5 years. Regardless of the amount actually “borrowed”. And I’m guessing there is a cap at 150% of the “loan”. So if you land a high paying job rt off the bat you could end up paying a lot more than you borrowed.
cool_dude85 5y ago
It's not interest, it's... hey, look, something behind you!
- KMag 5y ago
  See https://en.wikipedia.org/wiki/Contractum_trinius https://en.wikipedia.org/wiki/Contractum_trinius . There are lots of ways to slice and dice cash flows and quibble over what's interest and what isn't. (See also repurchase agreements, Islamic finance, general structured finance, etc. etc.) It's generally more useful to compare cash flows in terms of yield-to-maturity, instead of strictly by interest rate.
culi 5y ago
see edit. The major difference is you don't have to worry about one of the most common debt traps: getting stuck paying only the interest. The amount you have to pay is totally fixed. 150% of the principle is the most you'd have to pay assuming you've had a high enough paying job for long enough within that 5 year span after graduating (most people do)
KMag 5y ago
Presumably they mean that the total amount paid is not affected by the timing of payments. If they make a lot of money and pay it all off the first year, they pay the same total number of dollars as if they are unemployed for 4 years and make enough to pay everything off the 5th year. It's something like 50% financing fees, but 0% interest, and forgiveness after 5 years.
lelanthran 5y ago
> I don't understand, how do you end paying 150% of the principal loan if it's zero interest? That extra 50% is a once-off fee. A high fee, to be sure, and one that is deferred, but a fee nonetheless.

I don't understand, how do you end paying 150% of the principal loan if it's zero interest?

shagie 5y ago

You can either spend $20k up front for the bootcamp, or pay $30k as part of an ISA over 5 years.

willcipriano 5y ago
That just sounds like interest with extra steps.
- getcrunk 5y ago
  actually its interest with the least amount of steps. Amount due isn't variable and no compounding.
- imtringued 5y ago
  Non compounding interest? I think there is a better word for this.
  - btdmaster 5y ago
    https://en.wikipedia.org/wiki/Interest#Simple_interest https://en.wikipedia.org/wiki/Interest#Simple_interest
    - rootusrootus 5y ago
      Still has a time component, though. A flat 50% that is due whether you pay it off in 1 month or 60 months is a fee, not interest.
  - ummonk 5y ago
    The term is “fee”. It’s a 50% lending fee.
- TuringNYC 5y ago
  It is a static markup but not interest, as interest varies with time and is dynamic. This is a markup regardless of time.

vxNsr 5y ago

Because it’s an income share agreement, so whether you land a job making $100k or $51k you still owe 10% of your income to this company for 5 years. Regardless of the amount actually “borrowed”. And I’m guessing there is a cap at 150% of the “loan”. So if you land a high paying job rt off the bat you could end up paying a lot more than you borrowed.

cool_dude85 5y ago

It's not interest, it's... hey, look, something behind you!

KMag 5y ago
See https://en.wikipedia.org/wiki/Contractum_trinius https://en.wikipedia.org/wiki/Contractum_trinius . There are lots of ways to slice and dice cash flows and quibble over what's interest and what isn't. (See also repurchase agreements, Islamic finance, general structured finance, etc. etc.) It's generally more useful to compare cash flows in terms of yield-to-maturity, instead of strictly by interest rate.

culi 5y ago

see edit. The major difference is you don't have to worry about one of the most common debt traps: getting stuck paying only the interest. The amount you have to pay is totally fixed. 150% of the principle is the most you'd have to pay assuming you've had a high enough paying job for long enough within that 5 year span after graduating (most people do)

KMag 5y ago

Presumably they mean that the total amount paid is not affected by the timing of payments. If they make a lot of money and pay it all off the first year, they pay the same total number of dollars as if they are unemployed for 4 years and make enough to pay everything off the 5th year. It's something like 50% financing fees, but 0% interest, and forgiveness after 5 years.

lelanthran 5y ago

> I don't understand, how do you end paying 150% of the principal loan if it's zero interest? That extra 50% is a once-off fee. A high fee, to be sure, and one that is deferred, but a fee nonetheless.