4 ms·

That it doesn't compound doesn't mean it's not interest. That just means it's not compound interest.

ummonk 5y ago
It’s a fee, not interest. Interest is charged over time (either compounded or uncompounded, either way you pay more interest if you take longer to pay off the loan). Here they’re charging a onetime 50% fee.
- whakim 5y ago
  I think the point here is that "zero interest" isn't particularly compelling when the cost of credit is being driven up (to exorbitant levels) by another mechanism. An equivalent loan with a 5-year term would have an interest rate of almost 18% and in this case you don't have the option to save money through early repayment.
  - afiori 5y ago
    Debit is not just big digit, it is an ever deepening well. There are many people that have paid ten of thousand of dollars of their student loans and still saw the total due amount increase. A loan with a very reasonable 5% overall interest if paid on time can have unbounded interest if paid late enough. The student dept crisis is dominated by the latter kind of situations. (still yes, it is zero compound interest + 50% fixed interest)
    - mschuster91 5y ago
      > There are many people that have paid ten of thousand of dollars of their student loans and still saw the total due amount increase. The problem is a lack of financial literacy education on one side and a lack of career options for decent-paying jobs on the other side - a lot of office jobs these days require college degrees, and not everyone can work in the trades or join the military. Personally, I believe that all of this is actually designed the way it is to make money for the banks handing out student loans.
- catlifeonmars 5y ago
  To be pendatic, the fee is just interest that is compounded exactly once.
  - Ntrails 5y ago
    Instantaneously on contract creation and irrespective of loan term / repayment / etc. It's such a non-standard contract that the terms loan and interest are kinda fuzzy
fsckboy 5y ago
> That just means it's not compound interest. that's not true. simple interest is calculated on the remaining principal, thus it does continue to accrue with time (which this "zero interest 50%" does not) compound interest means interest calculated on the remaining principal and on accrued interest. https://www.investopedia.com/ask/answers/042315/what-difference-between-compounding-interest-and-simple-interest.asp https://www.investopedia.com/ask/answers/042315/what-differe...

It’s a fee, not interest. Interest is charged over time (either compounded or uncompounded, either way you pay more interest if you take longer to pay off the loan). Here they’re charging a onetime 50% fee.

whakim 5y ago
I think the point here is that "zero interest" isn't particularly compelling when the cost of credit is being driven up (to exorbitant levels) by another mechanism. An equivalent loan with a 5-year term would have an interest rate of almost 18% and in this case you don't have the option to save money through early repayment.
- afiori 5y ago
  Debit is not just big digit, it is an ever deepening well. There are many people that have paid ten of thousand of dollars of their student loans and still saw the total due amount increase. A loan with a very reasonable 5% overall interest if paid on time can have unbounded interest if paid late enough. The student dept crisis is dominated by the latter kind of situations. (still yes, it is zero compound interest + 50% fixed interest)
  - mschuster91 5y ago
    > There are many people that have paid ten of thousand of dollars of their student loans and still saw the total due amount increase. The problem is a lack of financial literacy education on one side and a lack of career options for decent-paying jobs on the other side - a lot of office jobs these days require college degrees, and not everyone can work in the trades or join the military. Personally, I believe that all of this is actually designed the way it is to make money for the banks handing out student loans.
catlifeonmars 5y ago
To be pendatic, the fee is just interest that is compounded exactly once.
- Ntrails 5y ago
  Instantaneously on contract creation and irrespective of loan term / repayment / etc. It's such a non-standard contract that the terms loan and interest are kinda fuzzy

fsckboy 5y ago

> That just means it's not compound interest. that's not true. simple interest is calculated on the remaining principal, thus it does continue to accrue with time (which this "zero interest 50%" does not) compound interest means interest calculated on the remaining principal and on accrued interest. https://www.investopedia.com/ask/answers/042315/what-difference-between-compounding-interest-and-simple-interest.asp https://www.investopedia.com/ask/answers/042315/what-differe...