Hello!
I just watched “Buffaloed”- a movie on Hulu… which goes into great detail about debt collectors in America. How they buy debt from banks for pennies on the dollar, and then come after debtors for the full debt making immense profit when the “debt” is repaid.
My question is, why does the bank need to sell the debt?
To whom does the bank owe money too?
I know banks give loans, but where do they get that money?
I know they can make profits off interest, but would that not take YEARSS to do before seeing profits large enough to dish out real cash to borrowers in a newly established bank?
I see how it all just cycles basically but my brain still doesn’t fully comprehend.
Maybe I’m asking for too much, and if I am and nobody has the time to explain- maybe someone could point me into the direction of educational material online because I’m not finding much on Google that doesn’t give me a headache because there is oftentimes a lot of financial jargon.
And before I get roasted, I went to a sh-t public school system deep in the rural south and I am still young, so please excuse me for my very very shallow understanding of all of this.
In: 5
Banks can lend like 9 or 10 times their deposits.
So if they have $1,000,000 in deposits they can lend out $9,000,000. Depending on the loan type they can get anywhere from 3% per year ($270K; from real estate loans) to 22% per year ($1,980,000; for unsecured credit cards). Now most banks have hundreds of millions if not billions of dollars in deposits, and now you can see how they make so much money.
Latest Answers