Underground loan sharks, how does the "point" system work?

[UATrewqaz]

You hear it alot in movies and on tv.

A guy owes money and the juice is X points per week.

How does this translate to an interest rate?

Like if someone owed $10,000 at 5 points a week, what doest hat mean? How much will he owe at the end of the week?

[mmcd]

$500 in interest.

[Ron Burgundy]

[ QUOTE ]
How much will he owe at the end of the week?

[/ QUOTE ]

A finger.

[Brainwalter]

X points a week = X% per week.

[UATrewqaz]

That works out to some INSANE APR, damn.

I just threw it into a spreadsheet, here is what you would owe at the end of each of the 52 weeks, assuming you borrowed 10K at 5 points per week (assuming that is 5% per week)

10000
10500
11025
11576.25
12155.0625
12762.81563
13400.95641
14071.00423
14774.55444
15513.28216
16288.94627
17103.39358
17958.56326
18856.49142
19799.31599
20789.28179
21828.74588
22920.18318
24066.19234
25269.50195
26532.97705
27859.6259
29252.6072
30715.23756
32250.99944
33863.54941
35556.72688
37334.56322
39201.29138
41161.35595
43219.42375
45380.39494
47649.41469
50031.88542
52533.47969
55160.15368
57918.16136
60814.06943
63854.7729
67047.51154
70399.88712
73919.88148
77615.87555
81496.66933
85571.5028
89850.07793
94342.58183
99059.71092
104012.6965
109213.3313
114673.9979
120407.6978

by the end of hte year you would owe 120K, assuming no payments were ever made

I'm also assuming you would have been killed way before then.

graph:

[tuq]

That's why they're in the business. Obviously their debtors don't have BofA as an option.

[rwanger]

[ QUOTE ]
That works out to some INSANE APR, damn.

[/ QUOTE ]

Yeah, but you have the overhead of hired goons.

Unless you're a total badass.

[wet work]

I think a typical loan structure is called 6 for 5. For every 5 you borrow you gotta pay 1 in interest per week. If
you can't pay the interest it gets tacked on to the principle. There are different types too, like you can't pay off principle unless you do it in one lump some. With those you could literally be paying that interest for years, after a real long time they may even forgive the original debt because they've already made so much off of you.
Even with just 10k loaned out at all times you make a great return in a year.

[Warik]

The fact that your finances suck so bad that a bank won't give you a loan and you have to go to a loan shark is probably the #1 reason why you shouldn't go to a loan shark.

[edfurlong]

So they loan 10k and make 104k of vig a year? I'm not familiar with loansharks but I suspect five points has to be way closer to realistic.