Loans

[unmerged(34330)]

Does anyone use them?

I've noticed nobody really talks about them in their strategy, and thus far I've mostly ignored them. Once in awhile I give a loan with a 1% interest rate to an enemy and hope he won't pay me back giving me a CB.

Am I losing out on money by not giving out loans, or would I get a better return on building other things?

In my experience, usually in the early game it seems like money is better spent on buildings or units, and in the later game when I have enough buildings and units... so there's not really much reason in getting even more money. Or am I missing something?

Thoughts?

 

[unmerged(85598)]

Oh, they can be a great source of income! I think they've patched it in NA, but one of the advantages in the past was that the interest was added directly to your treasury, so you'd have an interest-free source of monthly income.

I haven't done much with loans since then, but I'd imagine the extra money is still useful... And if you mint a bit, you can build a nice pool of income to increase your loan size or frequency.

When it comes to returns compared to buildings, though, I'm not quite certain... It depends on size, duration, interest, and availability, really, though I'd suspect buildings to outperform loans over time.

Loans have the advantage insomuch as their influence on other countries, however; since repayment is free if your borrower is broke come repayment time (which is usually the case, given the spendthrift AI), it's essentially giving them free buildings, units, or mercenaries depending on their current situation - you can use this to really strengthen an ally, fatten a target before an invasion, or give a third party a boost in a war against your mortal enemy.

The AI is also fond of building Centers of Trade with loaned money, so if you focus your trading efforts on one or two of them, and loan heavily to countries in the trade area of the others, you can find yourself the only nation with a decent trade income. Or, well, if that backfires and you're forced out of all your trade centers, at least it makes the economic map an interesting site.

If that sounds a bit broken, well, it is to a degree, but I think the last set of changes helped a bit with that - you're more limited in how many loans you can offer, and the target countries ability to repay is a bit more of a factor in whether they'll accept a loan or not (no thousand ducat loans to a country with an anual income of twenty, sadly). And, well, interest actually counting as income helps a lot - before, you could take a couple of loans, and reloan that money to other countries... Usually, you'd make back enough money to repay your loans, and have free money to continue your loan-centric strategy.

It'd be interesting to play a game as a small, isolated country somewhere, and see how much impact you could have on the other nations through loans alone...

 

[Timmetie]

no loan is ever going to pay back the 10% interest a year. In a 5 year 500 ducats loan that means you pay back 250 and 500 after that. Meaning you'd have to invest that 500 ducats in something that will earn you 250 in 5 years to make a profit..

It's an emergency fund for in war only, and is usually to be avoided like the plague as you have to basically not spend anything for 5 years in a normal economy (with inflation on of course)

 

[Wizzington]

I use them for two things - emergency war funding and funding for when I'm trying to fabricate claims on a province and my normal cash reserve isn't enough. Also the occasional loan when some event like "receive a university for 500 ducats" puts me into the negative. They can be useful, but only sparsely.

 

[unmerged(34330)]

I use them for two things - emergency war funding and funding for when I'm trying to fabricate claims on a province and my normal cash reserve isn't enough. Also the occasional loan when some event like "receive a university for 500 ducats" puts me into the negative. They can be useful, but only sparsely.

I see the various advantages of taking out a loan. My question was more geared toward giving a loan out to another country.

It was mentioned that the AI doesn't have to pay back a loan if they can't afford it. Why was that decision made? Why not just make them take out a loan from somebody else (their own citizens?) or make them go bankrupt? Or would that mean the AI countries would always be going bankrupt since the AI spends everything as soon as they get it?

Speaking of paying back the loan in one lump sum at the end of the term, why wasn't the loan system in EU made to mirror RL? In RL you have a monthly payment that's greater than the interest, so you gradually pay off the loan every month. That way one month before the term ends, you only owe a fraction of the original loan. That would fix the problem with the AI spending all it's money and not being able to pay back the loan. The monthly payment would be automatically deducted from their tech investment.

 

[Wizzington]

I see the various advantages of taking out a loan. My question was more geared toward giving a loan out to another country.

It was mentioned that the AI doesn't have to pay back a loan if they can't afford it. Why was that decision made? Why not just make them take out a loan from somebody else (their own citizens?) or make them go bankrupt? Or would that mean the AI countries would always be going bankrupt since the AI spends everything as soon as they get it?

Speaking of paying back the loan in one lump sum at the end of the term, why wasn't the loan system in EU made to mirror RL? In RL you have a monthly payment that's greater than the interest, so you gradually pay off the loan every month. That way one month before the term ends, you only owe a fraction of the original loan. That would fix the problem with the AI spending all it's money and not being able to pay back the loan. The monthly payment would be automatically deducted from their tech investment.

Sorry! I kinda skimmed the first post and assumed you were asking about taking loans. I feel stupid now.

The AI will always pay back a loan (tested in NA 2.1) if relations are high enough, even if they don't have enough money. I loaned like 2000 ducats to france as a test, which they all spent up, and were completely broke at repay time, yet they still paid me back.

If you just have 100+ relations loaning out money is a good way to earn extra cash.

 

[Disclaimer]

I used loans to other countries to great effect before the latest patch. In fact, you could make a ton of money from them if you used DataJs loan arbitrage method, described here

The mechanics of loans was changed in the latest patch, however, and since I am unhappy with some other decisions made there, I still have to find out how loans work there. Under the old rules "AI doesn't have to pay back loans" meant that they give you the money (if they like you enough), but that amount doesn't get deducted from their account. Not very realistic, but it worked great for you to make money.

EDIT: Just saw Wiz' last reply... So, actually DataJs method should still work with the latest patch, it's just a little (or a lot) harder to get going, since loan sizes (from the national bank) were cut back.

 

[dharper]

You should read DataJ's posts explaining how to become fantastically rich by lending money to the AI. He's infamous for his ability to turn the lending system to his advantage, amassing thousands of ducats in only a few decades of play, and has kindly explained how you, too, can do so.

Read his article, Economic Self-Defense and decide for yourself: exploit or sound strategy?

EDIT: Beaten by three minutes...