Corporate debt versus traditional mortgages | Finance & Capital Markets | Khan Academy

[@khmerforvaver]

first viewer!!! First commenter!!! Awesome ! your videos have helped me a lot!!!

[@Chitownboy1023]

some mortgage loans are also interest only.

[@matteo7moh]

Coool! Now I get why Sal was always using the whole interest rate of a loan when computing the net income ignoring the principal.

[@spirituelconnexion]

keep rocking Sal, thank you :D

[@kherabro]

If you guys are going to contradict anything in the video, make sure you make a direct reference with detailed explanations.

[@cowpacino]

what are the different advantages and disadvantages to the interest only loans?

[@puddingpimp]

@ShinEmperor That doesn't make sense, because the shareholder equity in the company would be wiped out, debt obligations come first, shareholder equity comes last. They would lose their entire stake in the company (well, unless they were IAG, haha)

[@pgplaysvidya]

I'm guessing this was done to allow corporations to continue to run on a fraction of costs (as opposed to needing to save up a one time payment of the total principle) while allowing banks to profit by having a steady stream of income from the interest payments, correct?

[@puddingpimp]

@deezynar They say they give you a 5% PER-ANNUM interest rate. the sneaky bit is that it is a compounded interest rate. it's obvious to anyone that a 5% per-annum (non-compounded) interest rate on a 20 year loan is 100% over the lifetime of the loan. What's less obvious is that it's ~265% interest when compounded yearly, ~271% compounded monthly, or ~272% compounded continuously. A=Pe^rt

[@iPropertyTraining]

Unless you choose an interest only loan which is a good strategy for investment property accumulation... to create better positive gearing and passive income

[@fayning]

Actually, i m interested to know why it is not so much heard that there are banks or loan service providers which offer loans to individuals (not just for the very rich, but for common people, with stable income, good credit record etc.) in interest only loan type. Would like to hear about its pros and cons, the possible social impact, etc. I have this upside-down thought like how it would be like to treat my life like i'm running a corporation, is there ways or what corporate ways of dealing with life matters i can follow to show the loan institution that an individual is as creditable as a successful corporation.

[@princejustin9]

I didn't why Corporations have to pay all the principal at once at the end. Why does it have to be different form traditional mortgage debt?

[@megeles]

@smokenfly514 he assumes they roll over their debt in the event they can't afford to pay all the principal at once, which unless the company grew a lot over the term of the loan, they probably can't

[@puddingpimp]

@princejustin9 I don't think it's that they "have to", I think it makes it more convenient, and makes the capital balance sheet clearer. You can say well this company has this much cash, and this much debt, and the amount of liabilities each month isn't going to change (interest is an expense, not liability). Otherwise they would have to adjust their liabiliities every month, and refinancing a loan would be more complicated.

[@bcnicholas123]

Seems kind of dangerous, using debt to pay off debt

[@fayning]

I heard stories about some people get access to low interest rate interest only loans, (maybe because they are knowledgeable or rich) and use the money to invest in some combinations of high yield fixed income (dividends paid out in different months) securities to earn the interest difference and because the principle part is not to be paid every month like common mortgage loan, it is easier for them to match the interest expense with the dividend paid out every month.

[@ilikechess1]

ohh wow I didn't know that.

[@SalsaTiger83]

@TheTeachaSehGaza If you believe that, someone has successfully manipulated into not understanding the world... Other than that I often wonder why Americans let their politicians do all this to them. Probably most of US Americans are too rich to take issue with lobbyism.

[@khmerforvaver]

@hedonism13 lolz I

[@hedonism13]

@khmerforvaver FUUUUUUUUUUUUUUUUU