Topic: How does BTCJam calculate interest rates? (Read 2675 times)

HI.

I would like to know my interest rate on early payment.
loan amount: Btc 0.95
rate: 32%
terms: 90 days

what will be the interest, should I manage to repay entire loan amount in 22 days?

Btcam seems to take a lot of ideas from prosper, they also use set interestrates for different borrower risk ratings, the problem with some of the changes btcam has made recently is that they dosent look to be enouth thought throu, its not a good time to set locked rates before btcjam have got the defaultrate down to a resonable level like something in the 1-5% level so they should have worked on that part first.
The first attempt btcjam did with locked rates obviously missed the fact that they had to set correct risk premiums, all A rated borrower for example cant have a 0.3% interestrate on a 7/7 loan unless btcjam handles collections centrally as the defaultrate is more than 1 on 333 on such loans so that system led to a lot of investors having negative return and btcjams stat page keept getting worse witch isent good advertising.
I completely agree that the current interestrates is extremely high especially on shorter term loans on the lower credit grades, but the second attempt btcjam did with the current locked rates is probably on a more correct level in relation to the avg defaultrates but people in many countrys and businesses understandable cant afford such rates so the late payments & defaults will probably get worse as the category of borrowers that will still take such high interest loans is limited.

Btcjam really need to step back and take a different approach on the locked interestrates, its ok to cut the top and bottom rates that people offered before the locked rates a bit, for example things like <0.1% interests or >100% interests per month should not be possible to set as uneperienced lenders has a hard time to judge the risks, but there still must be some spectrum of allowed interestrates until btcjam can shown that the defaultrates for the last 12 month period is on an acceptebel level before they force borrowers and lenders into set rates as they clearly dont work good with high default rates.

If btcjam would work more on solving the problems the platform currently have instead before they are introducing more new functions i think the site would work much better for both borrowers, lenders and btcjam.

Well you have to calculate with risk and invest strategical.
All investments means risk.
To lend money is normally not a risk, but in a p2p lendingsites I say it is kind of a huge risk and therefore you have to invest or lend with care.

But my question was more about the very new strategy BTCjam implemented.... :-)

Is there anyone with info about the recent change in interests on BTCjam?
It´s kind of skyrocketed and now its weird levels of interest rate on new loans.
Good for lenders but less good for borrowers. In long term i believe this will reduce the use of jam because it´s to expensive to take a loan.
Rates are 10-35% per month and that is not really ok in my opinion.
Any ideas of how the new calculations are made?

GreenCoin

Yes. Quite a few, which actually had a lot of other burned investors as well. I can post links if you want, just pm me and remind me of this thread, i can't keep track thanks.


Edit - right now i'm looking at 1.4 BTC in loss. UNLESS these deadbeats return and pay up. many blame btcjam support. I doubt it tho.

When you say lost, what do you exactly mean? You invested into loans which did not get repaid?

All i can say is to admit that I've lost more BTC there on that shit site than i will likely ever gain. Support Sucks. investments (?) Suck. Just a a whole lotta suck there - maybe the deadbeats willl come through, but i doubt it.

Edit - This is my last "investment". I'm clearly 100% HODLing now.

The problem with calculating the APR, the annual uncompounded interest rate in such way like btcjam does is that they will get incorrect values for all loans except those that only have one repayment date(7 day term with weekly payment and 30 day term with repayment 1st/5th/10th of the month).


A bitstampUSD tied loan is lending the bitcoinamount equal to a sertain amount of USD, so the repayment amount will go up or down depending on how the usd/btc price is at the repayment time is compared to the activation time at bitstamps exchange.

Here is the formula for how BTCJam calculates interest.

A posting advertises:
Amount/Monthly Interest Rate: ฿5.0 @ 3.0%
Term: 180 days

r (monthly interest rate) = 3.0%/100 = 0.03
N (number of payments) = Our Term of 180 days/30 days in a month = 6
P (principle/loan amount) = 5.0 BTC

The size of each payment is c, where c = (P*r*(1+r)^N) / ((1+r)^N-1) = 0.9229875 BTC
Total BTC paid back over 180 days = T = N*c = 6*0.9229875 = 5.537925 BTC
Percentage gained over Term = (T/P - 1)*100 = 10.7585%
APR = Percentage gained * A year in days / Term in days = 10.7585% * 365 / 180 = 21.81585%

im also a little bit confuse in interest in BTCjam.can i ask what is dif between bitcoin and bitstampUSD.


https://btcjam.com/listings/18694

Yes, makes sense. I was confused because I didn't realize that the interest rate frequency is the same as the payment frequency (weekly). I thought the interest rate frequency was the term (30 days).

Joe200

We use the same formula to calculate the weekly or monthly payments as they use in the mortgage industry:
http://en.wikipedia.org/wiki/Mortgage_calculator

In short, the borrower is paying 7% each week on the currently outstanding sum + some_principal, such that the principal+interest give an equal amount in 5 payments each. the total ROI for this listing is correctly calculated to 21.95%, as you point out. You can't do 5*7% since the 7% only always applies to the currently outstanding balance, which diminishes over time.

Hope this makes sense?

Here is a listing: https://btcjam.com/listings/18155 . B 0.2 @ 7%. Weekly payments of B 0.04878, 30 days. 5 payments -- that's not stated in the listing -- wish BTCJam would tell you the number of payments.

In the end, you get back 0.04878 * 5 = 0.2439. The return is 0.2439 / 0.2 = 21.95%. How do they get 7%?

I sortof understand how they calculate the APR. It's without compounding, which is reasonable, but I wish they would explain that. 21.95% * 365/30 = 267.06%. They give it as 267.00%. Where did the 0.06% go?