Anyone not liking the New Loan System??

[ukatlantic]

Am in one of the new games and have been messing around with the loan system,  I can fully understand credit rating etc as they are used in real life, but this new sytem has made it way more difficult to get loans, and the 'bank's must be loan sharks as when you pay it back you pay more than what you do if you keep the laon for the full period of time!!!! Now maybe I am missing something here (although I doubt it, as I do alot of financial work), but normally when you offer to pay back a loan early you actually pay less than what you would do if you keep it for the full term  a bank takes into account the fact that intersts is accounted for the time of the laon only and maybe an additional 1 month or 10% payback as a early repayment fee - so why isn't this the case in the game - its madness!

[Sami]

If you pay back the loan early, you break the contract made with the bank. And bank has fees for refinancing the sums you loaned .. thus you have to pay the premium. That does happen in reality too especially today when the interest rates are going down.

[castelino009]

true Sami,

but you interest gets deducted accordingly, you pay less interest and clcse the account.

[jest]

Sami, i have to agree with ukatlantic and castelino. If you pay your loan early, you will definitely pay a premium that is defined by contract but it has to be less than the amount you would pay over the 10 years. The bank is happy because you paid an extra fee and at the same time released the money to be loaned again. ( although in the aftermath of the financial crisis, this seemed not to be an issue, as banks were loaning 100+ times its actual reserves )

[swiftus27]

Come on, I work for a HUGE bank.

We don't whack business with these huge prepayment penalties.  3% - 6% all make sense.   There is NO reason it should still equal to the sum of all the remaining payments. 

Usually, it is something around (balance + accrued interest) * 1.03 =  payoff.

EDIT:  the way you have it and are describing it, you make it sound like any mortgage holder would have to pay off the entire loan (ALL PAYMENTS) in order to re-finance.   That is simply incorrect and simply impossible.  A normal mortgage, over 30 years, will have 2x as much interest as the principal.  You can't expect someone who wants to re-finance their 100k mortgage to have to pay a 300k payoff.

[ukatlantic]

well to give you an example I took out 2.4 Million over 10 years total repayment $4.4 Million to pay back the money early (like 9.8 yrs early too) total payment $5.5 Million!  (all figures approximate!) - sheer madness - if banks did that in RL then the Gov't  would certainly be revoking their financial licenses!

[oswegobag]

I love the new loan system concept and everything about it. I must agree though that the prepayment penalty is excessive. I also work for a major bank (I give out loans) and we have no pre-payment penalty at all.

[ukatlantic]

I think the concept is good, as it stops some airlines taking out huge loans to buy new aircraft, but the early payment penallties i think could be worked out better.

[Brockster]

^ Comepletely agree.

[737Capt]

You should not be penalized so severely for paying a loan off early.  This does not happen in the real world to such a degree.

[Powi]

I think the Airlines should be able to take huge loans to buy planes. That's hopefully what happens when aircraft ordering system is redone, so you can you the the planes you order with the loan to secure the loan.

On the other hand it will probably make new players more likely to bankrupt and experienced players with too much free time to grow exponentially.

[Jps]

I would imagine, that in real life, when you are requesting the loan, the bank wants to know what you use the money for, and when you say that you want to buy an airplane (or many), the bank will give it cheaper (or at least more money), if the airline agrees to give the airplanes to bank, if somethig goes wrong.

So, I think here, too, that should be possible: You could say to the bank, that you are going to buy (for example) 2 new Boeing 737-500s. You put that on the list, then request the money you need. If your rating is good otherwise, you get the loan, but since oyu haven't ordered the planes yet, there should be a system to not give you the money if you don't order the planes. So, maybe when the loan is accepted, you are given 'fake' cash, with which you can do nothing else, but order planes, after which the system notes that you have 2 planes coming, and it gives you the real money, which is then transferred to the seller of the airplanes. Gets a bit complicated, but this prevents abusing the system by telling that you are getting aircraft, but then you really aren't.

So, a summary:
-tell the bank which planes and how many you order, and request the money
-The bank gives you the 'fake' money, if you have a good enough rating
-You go on and order the planes (seler doesn't get the money yet, but planes become as if you ordered them already)
-Bank notices (automatically) that you have the planes on order, and sends the money to the seller. If planes cost less than loaned money, the rest money is either excluded or given as straight cash.
-The idea of this is to get the loan cheaper (and a bigger sum) than normally without securities. If you can't make the payments, the bank gets the plane and puts it on sale.

[estair]

In real life airline companies lease or buy the aircraft. They lease it when they do not have the money for it, many airlines do not have these milliones, so the companies lease.
If they buy the aircraft then they buy it with their money, it means they buy it for free money on hand which they have earned + investor money.
I think they never take a loan to buy a plane. Thats because to lease is cheaper then to loan the money. Another thing is that bank never gives money cheap for loan and if you request a loan you must have something "behind your back".

Lets say you want to buy 10 planes for 350 mil. The bank wont give you money just because you are a great company. They do a risk analysis. If you dont have anything big "behind your back" it means no guarantee that you pay the money back and you put these 10 planes on banks name than there is still a problem. Every year the banks do a check for your loan. But what happens to your aicraft value? After 1 year the value is not 350 mil. Lets say its 330 or what ever. The bank says....listen up guys, you payd us back with a year 15 million, but your 10 plane value is 330. You have to find 5 mil extra money, doesnt matter if it is real money, some other planes, maybe some infrastructure what you own or maybe some company stocks (usually). If you dont find the money at some point, say bye bye to your planes.

So no point in buying a plane for yourself and than take a loan from the bank. Better lease its cheaper in real life.

[Sigma]

If they buy the aircraft then they buy it with their money, it means they buy it for free money on hand which they have earned + investor money.
I think they never take a loan to buy a plane. Thats because to lease is cheaper then to loan the money. Another thing is that bank never gives money cheap for loan and if you request a loan you must have something "behind your back".

In real life airlines almost ALWAYS borrow money for aircraft.  You don't use cash-on-hand for something like that.  American's recent order for 787s for example was almost $20B, but they're a LONG ways from rolling in cash right now; they didn't reach into their purse for their wallet, they went to the market where they have a line of credit.  Borrowing money isn't expensive when you're using it to purchase a physical asset, much like how it's expensive to go get a signature loan from the bank, but a secured loan for a car is comparably very cheap.

Airlines place orders for aircraft in the TENS of billions.  But no airline thesedays is sitting on that kind of cash.  Few companies in the world are.  All major companies operate on lines of credit, particularly ones with large capital expenditures, hence all the economic turmoil and fear in the recent past about the credit markets freezing up. 

Airlines don't lease because it's "cheaper than to loan [borrow] the money".  They lease for countless other reasons, but namely that when they are young they don't have the large established lines of credit with finance companies to borrow the money.  Not that it's more expensive to borrow, quite the opposite, leasing is actually more expensive on a monthly payment basis than paying a loan (the leasing company does have to make a profit, a rather hefty one at that), they just don't have access to that level of capital yet.  There's also maintenance and tax reasons why some companies choose to lease as well.

But that's a different matter altogether.  What needs to change is these stupid prepayment penalties.  NO ONE is charged penalties like this in real life, not even close.  Having to pay MORE than the total payoff is not only realistic it's completely absurd.  It seems right now that you have to pay some 3% more than the total payoff to rid yourself of the loan, it should be more like 3% on top of the remaining principal[/b] as a penalty, which is a HUGE difference.

[Dano]

i agree with most of the players... the new loan system isn't a benifit for the game.

I hope there will be a change. At least in the new game. Other than that. Great GAME!!

[Kazari]

I like the loan system.

But I agree on the prepayment penalties. They're too severe.

[tofen]

I also like the new system, except the huge penalties.
It was to easy to take loans before, and airlines used it to grow to fast. Now, you have to think about paying back.

BTW, is there a limit that prevents players from taking a ten year loan, one year from the end of the game so they don't have to pay more than a small amount back?

[estair]

Sigma in which country do you live?
For example if you want to buy a car and you dont have the money, do you borrow money or lease? Here in eastern Europe always lease, because it is cheaper than taking out a loan.

Why lease? Sensible reasons:

Short term leases are convenient
Cancelletion options are valuable
Maintenance is provided
Standardization leads to low costs
Tax shields can be used
Avoiding the alternative minimum tax

But OK this is not a financial game, its airwaysim. Doesnt have to be that complicated. have to agree with Sigma and others that these penalties are unrealistic.

[tofen]

Sigma in which country do you live?
For example if you want to buy a car and you dont have the money, do you borrow money or lease? Here in eastern Europe always lease, because it is cheaper than taking out a loan.

Why lease? Sensible reasons:

Short term leases are convenient
Cancelletion options are valuable
Maintenance is provided
Standardization leads to low costs
Tax shields can be used
Avoiding the alternative minimum tax

But OK this is not a financial game, its airwaysim. Doesnt have to be that complicated. have to agree with Sigma and others that these penalties are unrealistic.

Where I live, in Sweden, most people loan money to buy there cars.
Companies uses leasing in higher degree, but in general loans are more common.

[estair]

Alraight here exactly the opposite, everyone leases not borrows. But the banks are the same, SEB and Swedbank