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Dear Client who borrowed in terms of USD.

neoxianPosted for Everyone to comment on, 5 years ago3 min read

Hello Client with loan in USD form. In this down market you are probably regretting your decision to put it in USD form.

Let's consider this example loan:

Steem Price: 1 usd

loan of 500 usd, pay back 550 usd in 3 months
The Bank pays 500 steem = 500 usd to the client.

Three months later:

Steem Price: 0.50 usd

Now the client has to pay 1100 steem = 550 usd.

Yea, that's not bad, paying out 500 steem to get 1100 steem back. That turned out to be a great deal.

But as you can imagine, I've had some clients contact me, wanting to renegotiate the loan...and put it back in terms of Steem...oh how shocking.

Keep in mind Client, that you were the one who wanted to do it in terms of USD, not me. Nearly 95% + of the time I simply let the client decide which terms to put it in.

So...should I just allow the clients to renegotiate the deal? That's an interesting question, let's consider that.

Suppose let's say this happens with the above loan:

Steem Price: 2 usd

Now the client has to pay 275 steem = 550 usd.

Isn't this a great deal for the client? The Bank gives him 500 steem, and he only has to pay back 275 steem. Lovely.

Clearly, this became a very bad deal for the Bank. If the Bank had simply not made the loan, it would have 500 steem worth 1000 usd, but instead only has 275 steem worth 550 usd. Though I suppose, one could argue the Bank still made 50 usd !?!?!?!!

Let's further suppose that in this situation, the Banks says "Hey Mr. Client, well you can see that I paid you 500 steem but I'm only getting back 275 steem, could you please pay me some more steem?" What would you think the Client would say here? Of course I've never actually asked this, but I suspect Client would say "Sorry Neo, a deal is a deal. I'm a poor Steemian and can't afford to pay extra". Isn't that what most people would say?

Oh Neoxian, I noticed you are getting shafted on our deal. Let me pay you some extra money to make up for that.

-- Said (almost) No Client ever!

(to be fair, I've had a few nice clients who tipped or paid a little extra in some cases)

Whenever I make a USD based loan, I'm making a bet that Steem will go down (while the Client is betting it will go up.) But apparently, I'm not allowed to actually win this bet, because if I'm winning it, well nope, the client wants to renegotiate, or perhaps even default.

So Heads you win, Tails I lose. I see how this works.

You know guys, I'm not a charity, I'm trying to run a business. Yes, I want to make money. I suppose that makes be a bad person. If I keep getting shafted too often I'll just have to stop making loans.

PS.

I'm not unreasonable, and have renegotiated some of the loans. In one case, I paid a Client for some logos he made for me, which helped his financial situation, see logos below.

(logos made by @shabbirahmad)

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