How do 'payday money' stores fund their 'buy now, pay later' loans?
Payday loan companies basically are banks (although they are incredibly terrible ones). Banks make money in two ways:  (1) They charge fees for services they provide (bank account fees, etc.); and (2) The interest rate differential: They borrow money from individuals and corporations (your savings account is essentially money you are loaning to the bank) for a small % paid to individuals, and then lend that money back to other people for a higher %. ie: You might earn 0.5% on your savings account, but then the bank takes that money and lends it to your neighbor for 2.5% as part of their mortgage. Payday loan companies make money in one way: They charge an enormous markup on money lent out to other people. The rates in some cases are so high (annualized interest rates of >1000% are not uncommon in countries without full regulation of this industry), that it barely matters where they get money from. They might get money from investors [who bought shares in the company, giving the company initial cash in the hope that they give dividends down the road], they might get money from other 'real' banks [who lend money just like they would lend money to any other business, with a regular interest rate], or they might have many from many other sources. They might even issue their debt publically, so that individuals could buy bonds from the company and receive a small amount of interest every year. The point is that the rates of return on the money leant by payday loan companies are so high, that the cost of where the money comes from is not terribly relevant.
"Figure out how much money you earn, what you spend it on, and how that will change when you have kids (will one of you stay at home? if not, how much will daycare cost and how do you finance the first few month when your child is still too young for daycare?) You will usually plan to spend your current Kaltmiete (rent without utilities) on your mortgage (the Darlehen that is secured by your house) - keep in mind though that a house usually has a higher utility cost than an appartment. When you've figured out what you can save/pay towards a house now and how that will change when you have kids, you can go on to the next step. If you don't want to buy now but want to commit to saving up for a house and also want to secure today's really low interest rates, consider getting a ""Bausparvertrag"".  I didn't find a good translation for Bausparvertrag, so here is a short example of how it works: You take a building saving sum (Bausparsumme) of 150000€ with a savings goal (Sparziel) of 50000€ (the savings goal is usually between 20% and 50% of the sum) and then you make monthly payments into the Bausparvertrag until you reach the savings goal at which point you can take out your savings and a loan of 100000 € (or whatever your difference between the Bausparsumme and Sparziel is). If you're living in an expenisve area, you're likely to need more than 150000 but this is just an example. Upsides: Downsides: If you decide to buy sooner, you can also use your Bausparvertrag to refinance later. If you have a decent income and a permanent job, then ask your bank if they would consider financing your house now. To get a sense of what you'll be able to afford, google ""wie viel Haus kann ich mir leisten"" and use a few of the many online calculators. Remember that these websites want to sell you on the idea of buying a house instead of paying rent, so they'll usually overestimate the raise in rents - repeat the calculation with rent raise set to 0% to get a feeling for how much you'll be able to afford in today's money. Also, don't forget that you're planning to get children, so do the calculation with only one income, not two, and add the cost of raising the kids to your calculation. Once you've decided on a property, shop around a bit at different banks to get the best financing. If you decide to buy now (or soon), start looking at houses now - go to model homes (Musterhäuser) to find out what style of house you like - this is useful whether you want to buy an existing house or build a new one. If buying an existing house is an option for you, start visiting houses that are on sale in your area in order to practice what to ask and what to look for. You should have a couple of visits under your belt before you really start looking for the one you want to buy. Once you're getting closer to buying or making a contract with a construction company, consider getting an expert ""Bausachverständiger"". When buying an existing house they can help you estimate the price and also estimate the renovation cost you'll have to factor in for a certain house (new heating, better insulation, ...). When building a new house they can advise you on the contract with the construction company and also examine the construction company's work at each major step (Zwischenabnahme). Source: Own experience." "Here's an answer to a related question I once wrote. I'm reposting here.  I can, but it takes a significant amount of time.   I'll do a short version which unfortunatley might leave more holes than you like. Basically, traders don't want to barter because it is hard to find the person with precisely the goods you want who wants to trade for the goods you have. Thus the need for ""coupons"" that represent value in a marketplace. Then you need to decide who gets to create coupons. If too many can issue them, problems arise, and no one trusts the coupons will be good later. Eventually you want one large bank/nation/trader to be able to issue them so everyone has the same level of trust in them, and you don't have the economic inefficiencies of many coupon issuers.  Next, the number of coupons needs to be enough to facilitate trade. If the amount of trade increases a lot, and the number of coupons doesn't increase similarly they become worth more, and people start to hoard them. This causes deflation, which causes less investment, which causes less growth, which hurts everyone in the long run.   If there are too many coupons added, this causes inflation, which causes people to spent them quicker instead of holding them. For reasons I won't cover here slight, predictable inflation is much better than deflation, so remember inflation is slightly preferred. Note that inflation is often caused not by the number of coupons but by external price changes.  Now, for a modern economy to do well, somone has to watch the economy, measure it carefully, and add/subtract coupons into the system as needed. Coupons, like all money, have no real value (whatever that means), but only have value because the holder expects to be able to trade them *later* for goods and services. You cannot eat coupons, use them for shelter (usually!), or wear them, but you want to trade them for such needs. The same is true for paper money, gold, stones, or almost whatever money system one uses. Money in all these forms is merely an IOU tradable for future goods.  The Fed is tasked (among other things) with making sure there is precisely enough coupons in the economy to keep trade functioning as well as possible. This is very hard to do since there are external and internal shocks to an economy (think disaster, foreign govts shutting off resources, rapid changes in people's tastes, etc.).   Central banks such as the Fed need to be independent of political control, since empirical evidence has shown that politicians tend to add more money to the system than is needed, because the short term gains give them votes, but the long term consequences (rapid inflation, unemployment, lower economic growth) are bad for society. This is why the Fed is largely out of congressional control, and large amounts of empirical evidence across hundreds of years and dozens of cultures shows this to be good.  Note: another function of the Fed is to be a lender of last resort to help prevent bank panics that were widespread in the 18th and early 19th century, something that none of us now remember, but it was a real problem. I'll skip that part for now.  So now we're at the point where the Fed needs to add/subtract coupons from society. To do this part justice takes significant time to cover all the reasons why various rules are in place (banking reserve requirements, for example), and you cannot learn it from one pass of reading.  But I'll try. Instead of being like the majority of internet fools that rail against the system, try to learn the *why* of all this, and you'll be much wiser and understand that it is all a pretty good system.  One method they use is the interbank lending rate. Banks have a reserve requirement, which is the ratio of coupons they need to have on hand as a ratio compared to the total coupons depositors lent them. This is usually around 1:10. The amount deposited that they can lend goes to business loans, school loans, mortgage loans, etc., and helps economies grow. Now when a bank on a given day falls short due to too many withdrawals, other banks (or the Fed) offers an overnight loan to meet reserve requirements, and the Fed sets the interest rate, which in turn drives other interest rates in the system.  This does not change the money supply very much.  Secondly, the Fed sets the reserve requirement, which vastly can change the amount of money available to society. But they change this rate so rarely (all the historical data is on the St. Loius Fed site, among others) that it is not usually an issue. I'll explain below how this can drastically change the money supply though the money multiplier.  Thirdly, and this is the part the poster above seems upset about, they conduct open market operations. This is the primary means by which the Fed exercises control over the number of coupons in play. The government, like businesses, like individuals, often needs to borrow money, in theory to invest in wise causes like infrastructure or perhaps money making enterprises such as technology investmeny (and I know what they often use the money for causes many to complain). The government, like companies, offers the sale of various contracts such as bonds to investors, who want a place to park some accumulated coupons for safety, and they get a return plus some interest. So the government sells bonds on the open market to investors, banks, pensions, foreign governments, basically to whomever wishes to purchase them at the market rate, and the government, like many individuals and banks, uses these loans to perform day to day functioning and possible smooth out volatility in spending needs. By law the Fed cannot purchase directly from Treasury. Now, once on the market, these bonds are traded, packaged, resold, etc., since they have inherent value, and since those owning them want to buy/sell them, perhaps before maturity date. This ""liquidity"" (ability to sell your goods) is necessary - fewer would purchase an item if they could not sell it when they desire. Thus bonds are bought, sold, and traded, and their prices fluctuate based on what the market thinks they are worth, just like any good.  Now, the Fed can buy/sell these bonds on the *open market*, like anyone else. So when the Fed wishes to increase the money supply, they can buy bonds that are not ""spendable"" money and inject money into the system. Note they now hold a bond that had at the time of transaction the same value as the money they injected. Note investors freely bought these from Treasury, meaning the market thought at the time of purchase that this was a good invesement. It is *not* the government merely wishing more money into existance. It is market forces that require more money for trades and is selling goods from the marketplace of (presumably) equal value to the Fed. This increases liquidity, but takes valuable assets from circulation. When the Fed wishes to shrink the money supply, they sell these bonds back into circulation basically by offering better terms than Treasury. In fact, you can find graphs of the Fed operations and see how every December they inject money for more Christmas shpping (need more coupons for more trade) and every January they extract some.  So open market transactions, buying and selling goods at market prices in the marketplace along with other traders, is how the Fed injects and removes money from the money supply. This is the primary mechanism that the Fed uses to control the number of coupons in the economy.  Finally, a little about reserve requirements and the money multiplier, since it affects so much of the number of coupons in play. This also I must simplify drastically. Each bank needs to hold 1/10 of all deposits in cash. The rest can be lent, which lands in another bank, which again can be lent, etc... Thus each $1 deposited can result in loans totalling 9/10 + (9/10)^2 + (9/10)^3 +... = 9 more dollars. Many people claim that banks are printing money, which is nonsense, since each also has an equal debt to pay to the person they borrowed from. When all loans are paid back there is no net money gain.  However, this allows for each $1 the Fed injects by buying bonds for there to be up to $9 in the economy, *if banks all loan to the fullest extent*. Banks tend to want to loan since loaned money makes them profit. Banks used to loan too much and runs on the banks caused significant problems, which is why laws were made to require *all* banks to have the same reserve requirement.  Now, when banks get scared and stop loaning, this 9 fold multiplier dries up, and the Fed has much less inpact on being able to target the proper number of coupons to keep the economy smooth. During the recent crash when banks stopped loaning, as each dollar was paid back on debts, there was significant shrinkage of available money for transactions, and this kills the economy. This is the ""liquidity crisis"".   Hope this helps. As I said, this is vastly simplified and I cannot go into all the reasons and historical items needed to understand it fully. It is a vastly complex (and necessarily so) and takes significant study to grasp the genius of it. It's similar to not being able to understand nuances of particle physics in one go, but as you study and work at it you see *why* things go as they do, and you learn all the failed methods (the gold standard is one example) that were thrown out for many good reasons.  Cheers." "The preferred accounts are designed to hope you do one of several things: Pay one day late.  Then charge you all the deferred interest. Many people think If they put $X a month aside, then pay just before the 6 months, 12 moths or no-payment before 2014 period ends then I will be able to afford the computer, carpet, or furniture. The interest rate they will charge you if you are late will be buried in the fine print. But expect it to be very high. Pay on time, but now that you have a card with their logo on it.  So now you feel that you should buy the accessories from them. They hope that you become a long time customer. They want to make money on your next computer also. Their ""Bill Me Later"" option on that site as essentially the same as the preferred account. In the end you will have another line of credit. They will do a credit check. The impact, both positive and negative, on your credit picture is discussed in other questions.  Because two of the three options you mentioned in your question (cash, debit card) imply that you have enough cash to buy the computer today, there is no reason to get another credit card to finance the purchase. The delayed payment with the preferred account, will save you about 10 dollars (2000 * 1% interest * 0.5 years).  The choice of store might save you more money, though with Apple there are fewer places to get legitimate discounts. Here are your options: How to get the limit increased: You can ask for a temporary increase in the credit limit, or you can ask for a permanent one. Some credit cards can do this online, others require you to talk to them. If they are going to agree to this, it can be done in a few minutes. Some individuals on this site have even been able to send the check to the credit card company before completing the purchase, thus ""increasing"" their credit limit. YMMV. I have no idea if it works.  A good reason to use the existing credit card, instead of the debit card is if the credit card is a rewards card. The extra money or points can be very nice. Just make sure you pay it back before the bill is due. In fact you can send the money to the credit card company the same day the computer arrives in the mail.  Having the transaction on the credit card can also get you purchase protection, and some cards automatically extend the warranty." "I can, but it takes a significant amount of time.   I'll do a short version which unfortunatley might leave more holes than you like. Basically, traders don't want to barter because it is hard to find the person with precisely the goods you want who wants to trade for the goods you have. Thus the need for ""coupons"" that represent value in a marketplace. Then you need to decide who gets to create coupons. If too many can issue them, problems arise, and no one trusts the coupons will be good later. Eventually you want one large bank/nation/trader to be able to issue them so everyone has the same level of trust in them, and you don't have the economic inefficiencies of many coupon issuers.  Next, the number of coupons needs to be enough to facilitate trade. If the amount of trade increases a lot, and the number of coupons doesn't increase similarly they become worth more, and people start to hoard them. This causes deflation, which causes less investment, which causes less growth, which hurts everyone in the long run.   If there are too many coupons added, this causes inflation, which causes people to spent them quicker instead of holding them. For reasons I won't cover here slight, predictable inflation is much better than deflation, so remember inflation is slightly preferred. Note that inflation is often caused not by the number of coupons but by external price changes.  Now, for a modern economy to do well, somone has to watch the economy, measure it carefully, and add/subtract coupons into the system as needed. Coupons, like all money, have no real value (whatever that means), but only have value because the holder expects to be able to trade them *later* for goods and services. You cannot eat coupons, use them for shelter (usually!), or wear them, but you want to trade them for such needs. The same is true for paper money, gold, stones, or almost whatever money system one uses. Money in all these forms is merely an IOU tradable for future goods.  The Fed is tasked (among other things) with making sure there is precisely enough coupons in the economy to keep trade functioning as well as possible. This is very hard to do since there are external and internal shocks to an economy (think disaster, foreign govts shutting off resources, rapid changes in people's tastes, etc.).   Central banks such as the Fed need to be independent of political control, since empirical evidence has shown that politicians tend to add more money to the system than is needed, because the short term gains give them votes, but the long term consequences (rapid inflation, unemployment, lower economic growth) are bad for society. This is why the Fed is largely out of congressional control, and large amounts of empirical evidence across hundreds of years and dozens of cultures shows this to be good.  Note: another function of the Fed is to be a lender of last resort to help prevent bank panics that were widespread in the 18th and early 19th century, something that none of us now remember, but it was a real problem. I'll skip that part for now.  So now we're at the point where the Fed needs to add/subtract coupons from society. To do this part justice takes significant time to cover all the reasons why various rules are in place (banking reserve requirements, for example), and you cannot learn it from one pass of reading.  But I'll try. Instead of being like the majority of internet fools that rail against the system, try to learn the *why* of all this, and you'll be much wiser and understand that it is all a pretty good system.  One method they use is the interbank lending rate. Banks have a reserve requirement, which is the ratio of coupons they need to have on hand as a ratio compared to the total coupons depositors lent them. This is usually around 1:10. The amount deposited that they can lend goes to business loans, school loans, mortgage loans, etc., and helps economies grow. Now when a bank on a given day falls short due to too many withdrawals, other banks (or the Fed) offers an overnight loan to meet reserve requirements, and the Fed sets the interest rate, which in turn drives other interest rates in the system.  This does not change the money supply very much.  Secondly, the Fed sets the reserve requirement, which vastly can change the amount of money available to society. But they change this rate so rarely (all the historical data is on the St. Loius Fed site, among others) that it is not usually an issue. I'll explain below how this can drastically change the money supply though the money multiplier.  Thirdly, and this is the part the poster above seems upset about, they conduct open market operations. This is the primary means by which the Fed exercises control over the number of coupons in play. The government, like businesses, like individuals, often needs to borrow money, in theory to invest in wise causes like infrastructure or perhaps money making enterprises such as technology investmeny (and I know what they often use the money for causes many to complain). The government, like companies, offers the sale of various contracts such as bonds to investors, who want a place to park some accumulated coupons for safety, and they get a return plus some interest. So the government sells bonds on the open market to investors, banks, pensions, foreign governments, basically to whomever wishes to purchase them at the market rate, and the government, like many individuals and banks, uses these loans to perform day to day functioning and possible smooth out volatility in spending needs. By law the Fed cannot purchase directly from Treasury. Now, once on the market, these bonds are traded, packaged, resold, etc., since they have inherent value, and since those owning them want to buy/sell them, perhaps before maturity date. This ""liquidity"" (ability to sell your goods) is necessary - fewer would purchase an item if they could not sell it when they desire. Thus bonds are bought, sold, and traded, and their prices fluctuate based on what the market thinks they are worth, just like any good.  Now, the Fed can buy/sell these bonds on the *open market*, like anyone else. So when the Fed wishes to increase the money supply, they can buy bonds that are not ""spendable"" money and inject money into the system. Note they now hold a bond that had at the time of transaction the same value as the money they injected. Note investors freely bought these from Treasury, meaning the market thought at the time of purchase that this was a good invesement. It is *not* the government merely wishing more money into existance. It is market forces that require more money for trades and is selling goods from the marketplace of (presumably) equal value to the Fed. This increases liquidity, but takes valuable assets from circulation. When the Fed wishes to shrink the money supply, they sell these bonds back into circulation basically by offering better terms than Treasury. In fact, you can find graphs of the Fed operations and see how every December they inject money for more Christmas shpping (need more coupons for more trade) and every January they extract some.  So open market transactions, buying and selling goods at market prices in the marketplace along with other traders, is how the Fed injects and removes money from the money supply. This is the primary mechanism that the Fed uses to control the number of coupons in the economy.  Finally, a little about reserve requirements and the money multiplier, since it affects so much of the number of coupons in play. This also I must simplify drastically. Each bank needs to hold 1/10 of all deposits in cash. The rest can be lent, which lands in another bank, which again can be lent, etc... Thus each $1 deposited can result in loans totalling 9/10 + (9/10)^2 + (9/10)^3 +... = 9 more dollars. Many people claim that banks are printing money, which is nonsense, since each also has an equal debt to pay to the person they borrowed from. When all loans are paid back there is no net money gain.  However, this allows for each $1 the Fed injects by buying bonds for there to be up to $9 in the economy, *if banks all loan to the fullest extent*. Banks tend to want to loan since loaned money makes them profit. Banks used to loan too much and runs on the banks caused significant problems, which is why laws were made to require *all* banks to have the same reserve requirement.  Now, when banks get scared and stop loaning, this 9 fold multiplier dries up, and the Fed has much less inpact on being able to target the proper number of coupons to keep the economy smooth. During the recent crash when banks stopped loaning, as each dollar was paid back on debts, there was significant shrinkage of available money for transactions, and this kills the economy. This is the ""liquidity crisis"".   Hope this helps. As I said, this is vastly simplified and I cannot go into all the reasons and historical items needed to understand it fully. It is a vastly complex (and necessarily so) and takes significant study to grasp the genius of it. It's similar to not being able to understand nuances of particle physics in one go, but as you study and work at it you see *why* things go as they do, and you learn all the failed methods (the gold standard is one example) that were thrown out for many good reasons.  Cheers." "(Disclosure - PeerStreet was at FinCon, a financial blogger conference I attended last month. I had the chance to briefly meet a couple people from this company. Also, I recognize a number of the names of their financial backers. This doesn't guarantee anything, of course, except the people behind the scenes are no slackers.) The same way Prosper and Lending Club have created a market for personal loans, this is a company that offers real estate loans.  The ""too good to be true"" aspect is what I'll try to address. I've disclosed in other answers that I have my Real Estate license. Earlier this year, I sold a house that was financed with a ""Hard Money"" loan. Not a bank, but a group of investors. They charged the buyer 10%. Let me state - I represented the seller, and when I found out the terms of the loan, it would have been a breach of my own moral and legal responsibility to her to do anything to kill the deal. I felt sick for days after that sale.  There are many people with little credit history who are hard workers and have saved their 20% down. For PeerStreet, 25%. The same way there's a business, local to my area, that offered a 10% loan, PeerStreet is doing something similar but in a 'crowd sourced' way. It seems to me that since they show the duration as only 6-24 months, the buyer typically manages to refinance during that time. I'm guessing that these may be people who are selling their house, but have bad timing, i.e. they need to first close on the sale to qualify to buy the new home. Or simply need the time to get their regular loan approved.  (As a final side note - I recalled the 10% story in a social setting, and more than one person responded they'd have been happy to invest their money at 6%. I could have saved the buyer 4% and gotten someone else nearly 6% more than they get on their cash.)" Another option is the new 'innovative finance isa' that allow you to put a wrapper round peer to peer lending platform investments. See Zopa, although I don't think they have come out with an ISA yet. "There are many flaws with your idea. Say I want to borrow $225,000.00 to accrue interest on a 1.20% APY   account. I promise ... that I cannot withdraw nor touch the   account by legal contract. If you break the contract and lose the money, the lender is out the money. They can take you to court and will win, but if you don't have the money, then they don't get paid. (You can't squeeze water out of a rock even if a judge orders you to.) By sharing the interest with me on a loan, they keep a percentage that they'd normally get... If you're ""investing"" the money at 1.2%, and the lender gets some amount less than that, then they are getting much less than they ""normally"" get. Lenders typically get somewhere from 5-15% on loans. The money can also be used to fund a stock/trading account. Regardless of whether I profit, I pay interest on the loan and split the profit shares 24/7. How can the lender lose with legal enforcing? Again, if you lose the money, no amount of legal enforcing can force you to pay money that you don't have. Even if you go to jail for fraud the lender still doesn't get paid. Simply, no bank would ever agree to this." Credit cards are often more fool proof, against over-drawing. Consider Bill has solid cash flow, but most of their money is in his high interest savings account (earning interest) -- an account that doesn't have a card, but is accessible via online banking. Bill keeps enough in the debit (transactions) account for regular spending, much of which comes out automatically (E.g. rent, utilities), some of which he spends as needed eg shopping, lunch. On top of the day to day money Bill keeps an overhead amount, so if something happens he doesn't overdraw the account -- which would incur significant fees. Now oneday Bill sees that the giant flatscreen TV he has been saving for is on clearence sale -- half price!, and there is just one left. It costs more than he would normally spend in a week -- much more. But Bill knows that his pay should have just gone in, and his rent not yet come out. Plus the overhead he keep in the account . So there is money in his debit account. When he gets home he can open up online banking and transfer from his savings (After all the TV is what he was saving for) What Bill forgets is that there was a public holiday last week in the state where payroll is operated, and that his pay is going to go in a day late. So now he might have over drawn the account buying the TV, or maybe that was fine, but paying the rent over draws the account. Now he has a overdraft fee, probably on the order of $50. Most banks (at least where I am), will happily allow you to overdraw you account. Giving you a loan, at high interest and with an immediate overdraft fee. (They do this cos the fee is so high that they can tolerate the risk of the non-assessed loan.) Sometimes (if you ask) they don't let you do it with your own transcations (eg buying the TV), but they do let you do it on automated payements (eg the Rent). On the other hand banks will not let you over draw a credit card. They know exactly how much loan and risk they were going to take. If Bill had most of his transactions going on his credit card, then it would have just bounced at the cash register, and Bill would have remembered what was going on and then transferred the money. There are many ways you can accidentally overdraw your account. Particularly if it is a shared account.