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[quote=”aguirrewar”]I would go with the 9 month @ 10.50%
the 18 month is double the time and only a 1.65% difference
I live with the “PRESENT” Money theory and not with a PROMISE of payment after X amount of time
9 months looks better than 18 months, by half the time[/quote]
Agreed!
Curious how they are able to pay such high rates? Generally speaking high rate of return=higher rate of risk. Do they offer an explanation?
[quote=”Lotus123″]Curious how they are able to pay such high rates? Generally speaking high rate of return=higher rate of risk. Do they offer an explanation?[/quote]
I think there are three explanations. First, they are a non-profit institution.
Second, they charge (by U.S. standards) very high interest rates on their loans. Their CD rates are “discounted” from their loan rates.
And third, interest paid by Costa Rican non-profit financial institutions is not taxable by Costa Rica. Commercial, profitmaking, banks withhold 8% of the interest on CDs in taxes.
simple MATH
they pay you that disposable income at that rate to SELL a loan at a bigger rate
GIVE me $100,000.00 and I will pay you %10 and I will loan 10 people $10,000.00 at %12
I make a 2% profit after the FACT and with your money, not mine
a loan is a loan
just be careful
SAVE and you will not need a LOAN
[quote=”Lotus123″]Curious how they are able to pay such high rates? Generally speaking high rate of return=higher rate of risk. Do they offer an explanation?[/quote]
In theory the bank should be “Lending” at rates higher than what they’re paying for deposits thus earning the “spread”. Alternatively, if loan demand is weak then the bank would invest in bonds. I don’t believe Costa Rica government bonds are yielding anywhere near double digit rates and I have no clue what lending rates in CR are like but, again, “in theory” the bank in order to be profitable must earn more on the deposits they’re taking in versus what they’re paying.
Some banks will offer “promotions” whereby they pay a higher than market rate and are actually losing money in order to attract deposits which could be a result of a strong economy and strong loan demand or it may also be a bank that “has issues” and is having a hard time taking in deposits which forces them to pay a higher rate.
The question is a valid one and in this specific case one would actually have to read through the bank’s balance sheet and financial statements in order to determine how they are managing their funding.
In addition to playing the spread between loan rates and deposit interest rates, it’s my understanding that Coopenae has recently received an infusion of cash from the Chinese. Remember, too, that they’re a non-profit and interest on deposits is non-taxable.
[quote=”DavidCMurray”] it’s my understanding that Coopenae has recently received an infusion of cash from the Chinese.[/quote]
An “infusion” of cash would not be a good sign. An “investment” by the Chines [b]would[/b] be a good sign.
[quote=”bogino”]An “infusion” of cash would not be a good sign. An “investment” by the Chines [b]would[/b] be a good sign.[/quote]
All right . . . all right. Split a hair! I don’t know if the cash is an infusion, an investment, an infiltration, an infestation or an intravenous. What I think I know is that some Chinese entity has made some cash available to Coopenae to use in its business.
Geeez!
[quote=”aguirrewar”]I would go with the 9 month @ 10.50% . . .
AND in 9 months I get 10.50% and redeposit it again for another 9 months @ 10.50% . . .
that is 21.00% in 18 months
NO????[/quote]
Actually, [b]NO![/b]
The rates are [i]per annum[/i], not “per term”.
In nine months, you won’t earn 10.5% (the [u]annual[/u] rate) because your money won’t have been on deposit for a full year. You’ll earn 7.875% (three quarters of 10.5%).
So if you invest for nine months at 10.5% [i]per annum[/i] twice (assuming you get 10.5% [i]per annum[/i] for the second investment), your return for eighteen months will be 15.75% for the 18 months. (I’m purposely ignoring the matter of reinvesting the interest earned in the first nine months (which you might or might not do) for simplicity’s sake.)
By contrast, my two-year investment at 12.35% will net me 24.70% at the end of the (longer by six months) term.
Your “9 months + 9 months” strategy nets you only 63.76% of what my “24 months once” strategy nets me although I’ll have to wait the full 24 months to reap my benefit while you’ll have your principal and your earnings six months sooner.
_________
Regardless which term you choose, there is a 3% early withdrawal penalty, so if you let your nine month CD run its course, you’ll earn 7.875% whereas if I cancel my twenty-four month CD at the end of nine months, I’ll net 9.35%.
[quote=”DavidCMurray”][quote=”Lotus123″]Curious how they are able to pay such high rates? Generally speaking high rate of return=higher rate of risk. Do they offer an explanation?[/quote]
I think there are three explanations. First, they are a non-profit institution.
Second, they charge (by U.S. standards) very high interest rates on their loans. Their CD rates are “discounted” from their loan rates.
And third, interest paid by Costa Rican non-profit financial institutions is not taxable by Costa Rica. Commercial, profitmaking, banks withhold 8% of the interest on CDs in taxes.
[/quote]David, My friends in Costa Rica have been making returns above 15% for years with bridge loans. That part of the deal is quite realistic. They however only loan 50 cents on the dollar on real assets and run the risk of owning these assets should the borrower not perform.
[quote=”jmcbuilder”]David, My friends in Costa Rica have been making returns above 15% for years with bridge loans. [/quote]
jmc, you’ve mentioned bridge loans before, but don’t they require a substantial fistfull of colones? And isn’t there a significant legal process in setting one up? I can’t imagine that the small amount of cash I have to invest would bridge anything larger than a commodious chicken coop.
By investing in CDs at Coopenae, there is no “process” whatsoever save for transferring the money to them and e-mailing Sr. Zamora my wishes regarding the terms of the investment. No attorney is required. No action in the National Registry is needed. And there is no matter of the credit quality of the borrower or the property in question.
Of course, all the preceding is based on the pre-condition that one is already a member of Coopenae. That required an hour of printing out or copying bank records, a utility bill, and our cedulas, a trip to San Ramon (in our case), a pleasant hour getting acquainted with Sr. Zamora, and a c5,000 deposit to our new savings account there. Once all that’s done, however, you’re done with it. Then it’s just a matter of making the transactions like any other banking activity.
[quote=”DavidCMurray”][quote=”jmcbuilder”]David, My friends in Costa Rica have been making returns above 15% for years with bridge loans. [/quote]
jmc, you’ve mentioned bridge loans before, but don’t they require a substantial fistfull of colones? And isn’t there a significant legal process in setting one up? I can’t imagine that the small amount of cash I have to invest would bridge anything larger than a commodious chicken coop.
By investing in CDs at Coopenae, there is no “process” whatsoever save for transferring the money to them and e-mailing Sr. Zamora my wishes regarding the terms of the investment. No attorney is required. No action in the National Registry is needed. And there is no matter of the credit quality of the borrower or the property in question.
Of course, all the preceding is based on the pre-condition that one is already a member of Coopenae. That required an hour of printing out or copying bank records, a utility bill, and our cedulas, a trip to San Ramon (in our case), a pleasant hour getting acquainted with Sr. Zamora, and a c5,000 deposit to our new savings account there. Once all that’s done, however, you’re done with it. Then it’s just a matter of making the transactions like any other banking activity.
[/quote]I’m only pointing out that the interest being paid is quite easily made and then some by Sr Zamora and I would not consider these loans to be in the high risk or unusual type. It also sounds that Sr Zamora is bound by Costa Rican banking laws. All good.
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