@ShinEmperor That doesn't make sense, because the shareholder equity in the company would be wiped out, debt obligations come first, shareholder equity comes last. They would lose their entire stake in the company (well, unless they were IAG, haha)
Why do you assume that corporations always indefinitely roll over their debt? You make it seem like just to have $1,000,000 immediately, the corporation would be forever be enslaved to interest payments.
@smokenfly514 he assumes they roll over their debt in the event they can't afford to pay all the principal at once, which unless the company grew a lot over the term of the loan, they probably can't
I like how they say they're giving you a 5% interest rate, but when you get the house paid off you've paid them 3 times the value of the house. I would call that %200.
@deezynar They say they give you a 5% PER-ANNUM interest rate. the sneaky bit is that it is a compounded interest rate. it's obvious to anyone that a 5% per-annum (non-compounded) interest rate on a 20 year loan is 100% over the lifetime of the loan. What's less obvious is that it's ~265% interest when compounded yearly, ~271% compounded monthly, or ~272% compounded continuously. A=Pe^rt
The thing is that mortgages are made for fixed terms (w/ the option of early pay-off) so I think it would be more ethical to state the interest in terms of the entire loan, not per-annum. Just saying.
@cowpacino good part, your montly pay is less since you only have to pay the intrest thats like 5% maybe each year.
bad part, at the end you still are in depth so you still need to pay off the money you lend. and your intrest is not getting lower while your pay may be less on mothly base in the long run you pay a lot more for the same loan.
I'm guessing this was done to allow corporations to continue to run on a fraction of costs (as opposed to needing to save up a one time payment of the total principle) while allowing banks to profit by having a steady stream of income from the interest payments, correct?
@princejustin9 I don't think it's that they "have to", I think it makes it more convenient, and makes the capital balance sheet clearer. You can say well this company has this much cash, and this much debt, and the amount of liabilities each month isn't going to change (interest is an expense, not liability). Otherwise they would have to adjust their liabiliities every month, and refinancing a loan would be more complicated.
@TheTeachaSehGaza If you believe that, someone has successfully manipulated into not understanding the world...
Other than that I often wonder why Americans let their politicians do all this to them. Probably most of US Americans are too rich to take issue with lobbyism.
@SalsaTiger83 i don't totally believe everything but, i recently watched some documentaries which show that the USA was sold to INTERNATIONAL bankers. president woodrow wilson signed a contract - the federal reserve act in 1913. and its all scam...i think thats why the US will never pay off the debt because we are a corporation
The whole thing makes sense now... pay the interest and when they default pass it on to the tax payer....
ShinEmperor 9 months ago
@ShinEmperor That doesn't make sense, because the shareholder equity in the company would be wiped out, debt obligations come first, shareholder equity comes last. They would lose their entire stake in the company (well, unless they were IAG, haha)
puddingpimp 9 months ago
I think it would have been more informative if you had explained why the debt is structured differently between a mortgage and corporate bonds...
simmsa24 9 months ago
some mortgage loans are also interest only.
Chitownboy1023 9 months ago
Hey Sal. Can you make a video about Lagrange multiplier please.
tttybhgf1 9 months ago
Why do you assume that corporations always indefinitely roll over their debt? You make it seem like just to have $1,000,000 immediately, the corporation would be forever be enslaved to interest payments.
smokenfly514 9 months ago
@smokenfly514 he assumes they roll over their debt in the event they can't afford to pay all the principal at once, which unless the company grew a lot over the term of the loan, they probably can't
megeles 9 months ago
@megeles yes, I understood
smokenfly514 9 months ago
If you guys are going to contradict anything in the video, make sure you make a direct reference with detailed explanations.
kherabro 9 months ago
I like how they say they're giving you a 5% interest rate, but when you get the house paid off you've paid them 3 times the value of the house. I would call that %200.
deezynar 9 months ago
@deezynar They say they give you a 5% PER-ANNUM interest rate. the sneaky bit is that it is a compounded interest rate. it's obvious to anyone that a 5% per-annum (non-compounded) interest rate on a 20 year loan is 100% over the lifetime of the loan. What's less obvious is that it's ~265% interest when compounded yearly, ~271% compounded monthly, or ~272% compounded continuously. A=Pe^rt
puddingpimp 9 months ago
@puddingpimp
You are right on the money! : )
The thing is that mortgages are made for fixed terms (w/ the option of early pay-off) so I think it would be more ethical to state the interest in terms of the entire loan, not per-annum. Just saying.
deezynar 9 months ago
How can I trust what you say is true? It sounds like facts but how can I be sure. I'm sure you understand where I'm coming from Khan.
JinxOz 9 months ago
this video is a bit misleading, there are several ways of loaning money and paying it back.
Descendancy 9 months ago
This has been flagged as spam show
@Descendancy How can I trust what he said to be true? It sounds like facts but how can I be sure. I'm sure you understand where I'm coming from.
JinxOz 9 months ago
what are the different advantages and disadvantages to the interest only loans?
cowpacino 9 months ago
@cowpacino good part, your montly pay is less since you only have to pay the intrest thats like 5% maybe each year.
bad part, at the end you still are in depth so you still need to pay off the money you lend. and your intrest is not getting lower while your pay may be less on mothly base in the long run you pay a lot more for the same loan.
shintsu01 9 months ago
Im a fetus and thanks to these easy instructions, im already planning on my mortgage
LoganBlackP 9 months ago
I'm guessing this was done to allow corporations to continue to run on a fraction of costs (as opposed to needing to save up a one time payment of the total principle) while allowing banks to profit by having a steady stream of income from the interest payments, correct?
piecharthosen 9 months ago
these comments suck
TheGstar1985 9 months ago
I didn't why Corporations have to pay all the principal at once at the end. Why does it have to be different form traditional mortgage debt?
princejustin9 9 months ago 7
@princejustin9 I don't think it's that they "have to", I think it makes it more convenient, and makes the capital balance sheet clearer. You can say well this company has this much cash, and this much debt, and the amount of liabilities each month isn't going to change (interest is an expense, not liability). Otherwise they would have to adjust their liabiliities every month, and refinancing a loan would be more complicated.
puddingpimp 9 months ago
someone told me the USA is a corporation, and i'm owned by an international banker.
TheTeachaSehGaza 9 months ago 9
@TheTeachaSehGaza If you believe that, someone has successfully manipulated into not understanding the world...
Other than that I often wonder why Americans let their politicians do all this to them. Probably most of US Americans are too rich to take issue with lobbyism.
SalsaTiger83 9 months ago
@SalsaTiger83 i don't totally believe everything but, i recently watched some documentaries which show that the USA was sold to INTERNATIONAL bankers. president woodrow wilson signed a contract - the federal reserve act in 1913. and its all scam...i think thats why the US will never pay off the debt because we are a corporation
TheTeachaSehGaza 9 months ago
That's interesting.
borisj87 9 months ago
keep rocking Sal, thank you :D
spirituelconnexion 9 months ago
so a corporation with that kind of dept is basically endless ?
KnuckleAndSlider 9 months ago
What is this? PONZII SCHEME ! ! !
freeadplanet 9 months ago
@freeadplanet google Ponzi Scheme then come back explain us why it is not a ponzi scheme
TheOkham 9 months ago
BORING
freeadplanet 9 months ago
ohh wow I didn't know that.
ilikechess1 9 months ago
first viewer!!! First commenter!!! Awesome ! your videos have helped me a lot!!!
khmerforvaver 9 months ago
@khmerforvaver
FUUUUUUUUUUUUUUUUU
hedonism13 9 months ago
@hedonism13 lolz I <3 U 2
khmerforvaver 9 months ago