                               Concept : Loans

 Loans in Empire are used to temporarily transfer money between nations, while
providing some guarantee that they will be repaid over time.

To effect a loan, a lender nation must execute the  lend  command.   The  lend
command  defines  the  amount  of the loan, the interest rate, and the payment
period.  The borrower can either accept or reject the loan; accepting the loan
immediately transfers the principal amount from the lender to the borrower, in
exchange for a promise that during each update, the borrower will repay a seg-
ment of the loan.

Each update consists of a fixed number of  ETUs  --  currently  defaulting  to
around  16, though this value can be easily changed by the Deity.  Interest on
Empire loans is calculated over a 1000 Empire Time Unit period.  Loan payments
are made each update.

A loan payment consists of a principal payment, and the interest on the  prin-
cipal  currently  remaining.  For example, suppose Groac lent $10,000 to Froom
93 with an interest rate of 75% over a 500-etu payment period.  Assuming there
were 16 ETUs per update, that means the first interest payment would be

                               Concept : Loans

           $10,000 * 0.75 * 16 / 1000 = $120

This would be added to the principal payment of

           $10,000 * 16 / 500 = $320

yielding a payment of $440 for the first update.  Each successive payment will
decrease,  because interest is only charged on the principal remaining, not on
the original principal.  For example, the second payment would be

           320 + (16 * $9,680 * 0.75 / 1000) = 436.16

Note that the principal payment will decrease in size if the  borrower  repays
part  of  the  principal  early.   This will also reduce the amount of overall
interest paid on the loan.

                               Concept : Loans

Unfortunately, there are many ways that a borrower  nation  can  avoid  making
loan payments!

If during an update a lender nation goes broke, then no payment is made on any
outstanding loans.  Instead, the interest segment of the per-update payment is
added to the amount of money remaining to be paid.  This process of adding the
unpaid interest to the remaining principal will occur forever!

If a borrower nation is currently at war with a lender nation, then no payment
is  made on any outstanding loans.  Payments are suspended in exactly the same
manner as "going broke", with the unpaid interest  during  each  update  being
added to the remaining principal.

In either case, actual principal payments will increase when and if the condi-
tions forcing the suspension of the loan are removed.

Once made, loans can never be cancelled by either party,  unless  one  or  the
other nation chooses to dissolve.  If a lender dissolves, all of his borrowers
are forgiven their debts!  If a borrower dissolves, all of his creditors  lose
their money!

                               Concept : Loans

As in the real world, loans are only as good as the borrowers to whom they are
lent.

See also (concept) : nation, update.

See also (commands) : accept, dissolve, lend, reject, retract, repay.

