A new lending service will let you borrow up to one million dollars and spend it on whatever you want–cars, vacations, homes, it’s all fair game. And the best part? You won’t have to pay this money back.
Generational Lending Group, based out of Cincinnati, seeks to revolutionize the credit industry by deferring loan repayment schedules for over two generations.
Slick Williams, the company’s founder and CEO, who previously owned a string of used car lots in Detroit, says he hopes to create a new credit model.
“I’m a big fan of no strings attached debt. You want a car. Buy it. You don’t want to work. Fine by me. I love giving people money they don’t have to pay back.”
So who does pay?
Slick says the debt will accumulate interest for a period of 70 years. After that time, a borrower’s grandchildren will share an equal burden of repayment, assuming they are at least 18 years old. Those underage will begin making installments when they turn 18.
The idea is an interesting one. Borrowers can spend the money on whatever they choose. Many may decide to continue living their current lifestyle and simply not work. It almost sounds too good to be true–and problematic on many levels.
But Generational Lending believes deferring payments has tremendous advantages for those who use the money wisely.
“First off, delaying the repayment makes it easier to pay back,” said Slick. “A hundred grand would be about what a million bucks was in 1950. If your grandpa had took out all that money and had ten grandkids, you’d all owe just ten thousand dollars apiece in 2019.”
Slick says if that hundred thousand were properly invested it would be worth tens of millions today, making a future $5000 price-tag laughable.
But critics point out serious problems in Slick’s logic.
Carl Hughes, a financial adviser in New York, says the proposal takes predatory lending to the next level.
“This guy is telling you this loan is going to make your grandchildren money? That’s if you never spent a dime of it, and who’s going to do that? He also doesn’t mention the interest. Your grandchildren aren’t going to be paying $5000. They’re going to be paying hundreds of thousands or millions of dollars at best.”
The Jest spoke with George Smith, one of the program’s first borrowers, and his story echoed Hughes’ concerns. Smith said he has already taken half a million dollars in loans and plans to take the rest next year. In three months he has quit his job and purchased a new home and car.
“Three months ago I was living in a tiny apartment, barely paying the bills. Now I’ve got over three-hundred thousand dollars in the bank, an upscale house in the suburbs, and a hot new Corvette. I’d say life is pretty good right now.”
George Smith
Mr. Smith spent the first hundred-thousand dollars on an elaborate vacation in Las Vegas.
“I guess I should have shown a bit more restraint at the roulette wheel,” he said with embarrassment.
But he said he wouldn’t have taken the loan if his children would have had to pay it back.
“I don’t think I could have done it knowing Sally and David would have been stuck with my choices. But we’re talking 70 years into the future. The world may not even be here,” said Smith.
A Moral Issue
When asked if he is bothered by his grandchildren paying his debts, he nodded. “It keeps me up at night. I’m trying to think of some way to make it right. Hopefully, this will motivate all of us to make more money.”
The generational lapse will ensure that, should Smith’s children reproduce, they will be responsible for the debt, with interest–where generational lending really makes its money. Over 70 years, one million dollars balloons to about 30 million, or even higher, depending on the interest rate.
“It’s just absurd to think your grandchildren can pay that back,” said Hughes. “Sure, you might have one person out of a hundred do this right, but the vast majority of the people are forcing their descendants into financial ruin.”
There is another clause in the contract we reviewed that is perhaps more worrisome. Should a grandchild be unable to pay the debts, the burden will pass to their offspring upon death. This could result in a dozen generations making interest payments alone before the principal is even touched.
The solution, according to Slick Williams, is simple. “You pay the interest out of the principal. Have your kids pay the interest. Fair enough?”
An interest rate of 5% would require payments of $50,000 annually to prevent the principal from increasing.
Most feel dumping loads of debt on a future generation is immoral.
“This is the most insidious thing I’v ever seen,” said Hughes. “We think it’s bad that kids are accumulating mortgage level debt to get a college degree. Imagine owing ten times that the day you graduate high school. And you’ve been contractually obligated with your consent.”
But Slick disagrees.
“Look, you hear someone say I’m going take a million dollars in debt and make my grandkids pay for it, and that sounds kind of bad, I get it. But people are forgetting that their grandkids can take out these types of loans too.”
Hughes says this “punting of the football” isn’t sustainable. “The bottom line is that they’re marketing to irresponsible people in the first place. They aren’t going to spend this money wisely. They’re going to spend it selfishly. It has the worst aspects of loan sharking and a Ponzi scheme all rolled into one.”
Is it Legal?
In short, no. The law states that no creditor can force a non-party to a loan into repayment, even the borrower’s grandchildren; but this hasn’t stopped Generational Lending Group. In fact, they have moved forward with a dozen more loans, and plan to open offices in every major city by the end of next year.
“Oh, someone will sue,” said Slick. “We’re ready for that. Our contracts stipulate that those kids have to pay, and they’ll pay. I can’t wait for the federal government to take issue with this. They’re doing the exact same thing with the national debt. How can they say anything?”
Indeed, the federal government continues to borrow money at record pace, saddling future generations for today’s spending. The United States national debt currently rests at 22 trillion dollars and is expected to climb well beyond that as liabilities increase.
“When they stop, so will we,” said Slick with a wink.
You can contact Generational Lending Group for a consult, where they will discuss the loan right for you. Terms and conditions apply.
In order to qualify you must be over the age of 18 and have at least one child.
