Does loan repayment not cover the principal and interest?

[towerbooks]

I was wondering how loan actually works in the game. Does the loan take repayments at a set period and it goes towards your principal amount + interest or do loans have a deadline to pay the full amount? I seem to find the initial principal amount to be untouched despite a few months in to the loan. I don't know if it is a bug or working as intended.

[eleaza]

Loan mechanics in the game is very simple, just pure interest payment every day (not monthly), and you can pay back the principal any time you want (or not at all).

It's actually more like a hybrid between banks buying corporate bonds and asset backing loan.

[towerbooks]

Loan mechanics in the game is very simple, just pure interest payment every day (not monthly), and you can pay back the principal any time you want (or not at all).

It's actually more like a hybrid between banks buying corporate bonds and asset backing loan.

Oh. Ok. I wish there was an option to either do the current mechanic or have an alternative option to slowly pay the principal amount and interest. I can see the advantage/disadvantage of the current mechanic but as of the moment I would prefer to slowly chip away on the principal amount so my interest repayments will also get reduced in the long run.

[eleaza]

Loan mechanics in the game is very simple, just pure interest payment every day (not monthly), and you can pay back the principal any time you want (or not at all).

It's actually more like a hybrid between banks buying corporate bonds and asset backing loan.

Oh. Ok. I wish there was an option to either do the current mechanic or have an alternative option to slowly pay the principal amount and interest. I can see the advantage/disadvantage of the current mechanic but as of the moment I would prefer to slowly chip away on the principal amount so my interest repayments will also get reduced in the long run.

You can just manually pay at little as you want, it's actually giving players more freedom to choose (no penalty of forgetting to pay). But I guess, it's more micromanaging though. However I don't think most players would simply forget to pay, since the interest payment is daily tick, it's a very constant reminder. And personally I would almost always pay back as much as I can and keep the cash as low as possible, and then take out more loan when needed (unless it's a very long term big expansion plan, where I know I couldn't get the loan limit back in short period of time)

If we want to devise automatic payment of principal, than we would certainly need more complex loan mechanics, at least the loan duration, maybe different interest rate related to long or short term loan?

[towerbooks]

Loan mechanics in the game is very simple, just pure interest payment every day (not monthly), and you can pay back the principal any time you want (or not at all).

It's actually more like a hybrid between banks buying corporate bonds and asset backing loan.

Oh. Ok. I wish there was an option to either do the current mechanic or have an alternative option to slowly pay the principal amount and interest. I can see the advantage/disadvantage of the current mechanic but as of the moment I would prefer to slowly chip away on the principal amount so my interest repayments will also get reduced in the long run.

You can just manually pay at little as you want, it's actually giving players more freedom to choose (no penalty of forgetting to pay). But I guess, it's more micromanaging though. However I don't think most players would simply forget to pay, since the interest payment is daily tick, it's a very constant reminder. And personally I would almost always pay back as much as I can and keep the cash as low as possible, and then take out more loan when needed (unless it's a very long term big expansion plan, where I know I couldn't get the loan limit back in short period of time)

If we want to devise automatic payment of principal, than we would certainly need more complex loan mechanics, at least the loan duration, maybe different interest rate related to long or short term loan?

Well that is indeed one of its advantages but what would be nice is a more complex loan where you can choose the term of the loan and whether or not interest will be fixed or variable. Also the bank should make a loan schedule for you that would present your payment and how it is broken in to principal and interest payment. The problem I have with the current system is despite its daily repayments, it lacks the sense of urgency that real life loans have. Debt is not entirely bad when put to proper use but would be nice to worry about loans as they fall due.

Heck if the bank asks for a collateral like lets say one of your properties, you will really feel the need to take care of that loan.

[eleaza]

Heck if the bank asks for a collateral like lets say one of your properties, you will really feel the need to take care of that loan.

Although current loan is "asset-backing", but it's kind of all or nothing like pure credit loan. The bank theoretically only get to liquidate asset after your company actually go bankrupt in current mechanics (but we don't know, since the game is already lost).

So it might be interesting to have some kind of limited automatic foreclosure (in current mechanism, you can sell assets to gain temporary cash, also the out-of-cash screen will prompt you to manually do that), when the debtor failed to pay "automatic" payment due lack of cash, the collaterals will be sold. However, that would mean particular loan will be broken down into smaller pieces where each loan is backed by specific asset, so the automatic process would know which asset to cease. In a way it's increasing the loan granting process with one further step and more micromanagement in the future, but on the other hand it would be more realistic I suppose.

[towerbooks]

Heck if the bank asks for a collateral like lets say one of your properties, you will really feel the need to take care of that loan.

Although current loan is "asset-backing", but it's kind of all or nothing like pure credit loan. The bank theoretically only get to liquidate asset after your company actually go bankrupt in current mechanics (but we don't know, since the game is already lost).

So it might be interesting to have some kind of limited automatic foreclosure (in current mechanism, you can sell assets to gain temporary cash, also the out-of-cash screen will prompt you to manually do that), when the debtor failed to pay "automatic" payment due lack of cash, the collaterals will be sold. However, that would mean particular loan will be broken down into smaller pieces where each loan is backed by specific asset, so the automatic process would know which asset to cease. In a way it's increasing the loan granting process with one further step and more micromanagement in the future, but on the other hand it would be more realistic I suppose.

Yeah it makes sense if you think about it about liquidation only happening once you are really bankrupt. But like I said, I would be happy if there is an option to use the current loan system or a system that sets a deadline for your loan and create a payment schedule. One of the things that bother me is that when you start as a private company, you barely have anything and the question from the bank will be why would they lend you money when you don't have any pre-existing assets they can use as collateral. But then again your borrowing limit will be based on your ability to repay it.

[eleaza]

One of the things that bother me is that when you start as a private company, you barely have anything and the question from the bank will be why would they lend you money when you don't have any pre-existing assets they can use as collateral. But then again your borrowing limit will be based on your ability to repay it.

Well, it's the same even in real world, new startup companies don't and can't rely solely on banks to gather startup capital if the investment is really high (or if the start up initial capital come from "family" money, or personal investment already to stay private). It's true for in-game "IPO", it's also much easier and faster if you leverage the capital smart.

In the real world credit loan, even for businesses they are fairly limited and need people with enough assets to back you up, thus banks will have insurance, and the credit loan would be huge.