Unusual Loan question

Sham Squire

Alright, if I borrowed €100,000 no questions asked and promised to pay it back in one lump sum in 3 years time, regardless of the likelyhood of anyone giving it to me, whats a reasonable amount that I should be expected to pay back? Thats at a current rate of interest on loans of that amount.
Remember, one lump sum repayment after 3 years, having borrowed €100,000

Thank You.

jayok

All depends on "how it's borrowed":

For a mortgage, you'll get mortgage rate at 3.5% average interest only. So it's very simple:

Yearly Interest: 100,000 * 0.035 = 3,500

Over 3 years, you'll pay 3*3,500 = €10,500 in interest

For personal loan this would probably be 8%. That's €24K after 3 years :eek:

But as you noted getting the €100K in this manner might be difficult.

dunkamania

Its a little more than that,because you are defferring interest payments until the end you will be paying interest on the interest

Your first years interest would grow from 8000 to 9331.2 by the end of the third year

Your second years interest would be 8640 by year 3

So total interest would be 25,971.2 at an 8% interest rate.


I think that would be the way the banks would do it.
I dont see them giving the loan without it being fully collateralised

jimmycrackcorm

Plus there's a question on security. If someone were to get a lump sum without having to show any replayment ability for three years then they should probably have to pay a risk premium on top of the interest.