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Friday, 25 September 2015

How much you charge for being "Ah Long"?



How much interests do credit card companies charge for lending money to consumers? 

Write it down.


How much do licensed money-lenders charge?

Try google or make a phone call.

Write the rates down.


Ever wondered how much do illegal money-lenders charge?

Talk to a taxi-driver.

Write it down.



Now, if you have $1,000 to lend to a stranger (can be a company) you have never known before, how much interests would you charge?

If you charge lesser than the credit companies, someone is sniggering behind your back.

Remember, credit companies have access to your credit report before approving your credit card application. 

If you default, there are quite a few legal recourse to recover their money:

Wage garnishment

Levy on your savings accounts

Lien on your assets or property



Pray tell how are you going to recover your $1,000 in the event of a default? Small claims court? Ask big daddy for help?

Yup, by now, you probably want to charge "Ah Long" rates for the risks you are taking!


Before you do so, you may want to check with your religious shepherd whether this may fxxx-up the end game for your after-life...

We don't want to be more financially literate than those amateur retail "money-lenders"; but end up committing the sin of usury, do we?

Ouch!



12 comments:

  1. In the first place if you lend money to a friend or kin who really in "needs", be prepared to (at least in your mind, it's a kind of charity) tell him, "Don't worry, don't worry. Take your time, take your time."
    Never think of lending money for anything else.

    ReplyDelete
    Replies
    1. temperament,

      But, but, other people say (poking myself) there's a new alternative investment option to secure "passive" income. The yield can be higher than REITs some more!

      What can go wrong?

      It's win-win! (yeah right - other people reject you lap it up)

      Delete
  2. Of course lah!
    i totally understand money makes money too for some people, no matter what.

    ReplyDelete
    Replies
    1. temperament,

      I like to tease "holier than thou" politically correct "investors" who pontificate they don't invest in gaming, liquor, or tobacco companies...

      I ask whether they own banking stocks (when I know they do) and watch them squirm ;)

      If only I can make 25% returns like the credit card divisions of banks...

      Delete
  3. Hmm...SMOL

    Actually how much ah long charged huh?

    100% per annum?

    ReplyDelete
    Replies
    1. Sillyinvestor,

      Eh, I'm not a taxi-driver (yet).

      So I won't tell you.

      I guess during your childhood or youth, you didn't mix with people that have "paintings" on their bodies, or placed bets with illegal bookies staying in the same HDB block...

      Looking back, those we interesting times in the 70s!

      Delete
  4. My MiL with relatives in China told
    Me many in China making big bucks by being shadow lenders.

    But they charge cheaper than banks.

    Everyone having a good time until the excess capacity come
    Into play.

    ReplyDelete
    Replies
    1. Sillyinvestor,

      Think about what you've just said.

      Does it make sense?

      Hello! Only fools would charge LOWER than banks!

      It's not just the risk of not getting your money back, there's prison time too!!! Don't you want to discount that? You think why Ah Longs have to charge so high interests!? Duh!


      I was in China.

      Yup, you could make a lot of money from usury.

      Many well-off Chinese individuals and companies engage in shadow lending. It started to unravel a few years back in Wenzhou when some big-time company owners started defaulting - either running away or committing suicide.

      Of course there were the same dumb-ass China retail "investors" who lent their savings at 10% interests to these Wenzhou businessmen who in-turn lent the money out at 30% or more to other desperate entrepreneurs who badly needed cashflow to tide over...

      When the first domino fell, the rest felled too.

      Who took on the most risks and earned the least?

      Can they go to the police for recourse when they were party to illegal activities?

      Delete
  5. Hi SMOL,

    I think I know what you are referring to. Having done credit analysis of SMEs before, I think the one charging the fees for being the middle man is in the best position if you look at risk reward. Personally I love sin companies and REITs...more so than banks! Haha

    ReplyDelete
    Replies
    1. Joyce,

      Trust a lady who worked in a bank before to know what I am referring to ;)


      First sell to the ones getting the loans they can get rates below credit card companies or in the junk bond markets.

      Second market to the lenders they can get higher returns than fixed deposits or volatile dividend stocks like REITs.

      The person who says win-win is the one smiling to the bank.

      Delete
  6. Be a PM and get USD700 million donations! all problems about lending and borrowing solved! Hahhaa

    ReplyDelete
    Replies
    1. Rolf,

      It's hilarious until it dawns on me what happens in Malaysia will affect us in Singapore.

      All of sudden, it makes complaints about our ministers' salaries and Temasek losses during GFC sound so petty...

      Delete

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