We all have heard of it.

Interest on loans is high at present.

The loan carries 5.5 interest.

loans to this bank.

And let's say you still owe pretty close to 150 thousand on the loan to the bank your loan might have even been an interest only loan but even after a year or two you're probably not going to pay down the balance of your loan too much it might be like 140 thousand, or 145 thousand

There might be a little bit of paying down the equity.

And for the sake of simplicity, I'm going to assume that the loans in this presentation are interest only loans.

And this is how a I don't want to say a traditional

Why were they willing to pay rent, when they could have bought a house, where the mortgage would have been interest plus a little principal it would have been no more than 400 a month?

Six percent home loans represent the industry average now.

A mortgage rate of six percent is becoming the current industry average.

I think most of us have a sense that payday loans are probably not the best source for a loan, that they probably charge a lot of money to those people who need that cash really badly.

This is highly rated mortgage backed securities, maybe they have a slightly higher interest rate.

Banks charge higher interest on loans to risky customers.

In a traditional mortgage, you actually, your payment has some part interest and some part principal.

And then of course at a party, when I start to explain this, it's like, ah ha.

Or what you think the real interest will be after you take into account people pre paying their mortgage, people defaulting on their mortgage, and other things

And what are they?

Let's say I make out some loans for different projects.

Corporate loans tend to be for simplicity purposes, interest only loans.

To do that, we would actually have to take and you might want to watch the video on this if you were to let that just compound, and you can imagine if you're the payday

The mortgage payment, we calculated that before, using our mathematical knowledge of geometric series.

And what tax deductible means, is that this amount of money that I spend on interest on my mortgage,

Most important of all, I believe, is working with small groups of women, providing them with opportunities for micro credit loans.

But for operating capital that is money you need when your company is an ongoing concern in generating revenue well, lease lines make sense, factoring, vendor financing.

Everyone pooled in.

So for example, this Loan A over here.

But for the simplicity of this argument,

Can a bank just continue issuing loans and checking accounts indefinitely and essentially collecting the difference in the interest between the interest it gets on the loan and the interest it gives on the checking account?

Now we start off saying this probably not a good idea and you got a sense of that, because we're essentially paying 25 interest for every two weeks, not for every year.

The reserve store value is gold.

She paid seven percent interest on the loan.

And they want to do two things they want to inject this money into the banking system, which essentially will, hopefully, find its way into the economy, and they also want to lower the interest rate, especially the short term interest rate, this overnight borrowing.

Before Interest and Taxes.

Remember, this is the annual interest rate but this is an overnight loan.

The math is a little bit more difficult with that, so what we're going to do in this case is assume that I only pay the interest portion, and at the end of the loan I pay the whole loan amount.

I also want 100 of that.

And of course the difference is the money that he had to spend on tax.

OK, so let's say I borrow 1,000.

You can also take an interest only loan, but the component of the interest is the same.

We borrowed money at high interest.

It's before we think about how the business is structured.

This is actually the power of compounding interest.

So where we left off is, there was 1,000 people who all needed, let's say, 1 million loans each.

You know, we take out these loans to buy houses.