Just a Complaint About Bad Economics/Accounting in EU4

[Cheimison]

If you take out a loan in EU4 and repay it early you are forced to pay the full amount of interest as though you had let the loan run for the full term of five years. This would never be done.

1) If the lender insisted on these terms, the borrower would never repay early. If nothing else he could keep and enjoy the money for the rest of the term, and if he had no direct use for it he could always lend it himself and thus compensate himself for the additional interest. Since the amount to be repaid is the same whether you pay it back in one month or five years, he may as well just keep it lent out for five years.
2) It increases the risk on the lender because instead of getting the loan back when his client has it for sure, he has to hope his borrower remains solvent and prudent for the next several years and doesn't get robbed or cheated.
3) It does not benefit the lender financially because if, instead of having to wait for five years he had received the money back, the lender could lend it out again and make the interest rate on it (and as I explained above no one would repay early if they had to pay the full interest).

There are sometimes fees for making early or irregular payments on loans, but these are certainly not proportional to the loan or equal to the sum of the interest - that would be silly for all the reasons above, and also not competitive because other lenders could afford to do it more cheaply. What these fees cover are additional book keeping and labor costs, and as these are relatively consistent for loans from several thousand to several hundred thousand dollars the fees are also relatively consistent. In fact, in an era before bureaucracies which pry into your books looking for a prosecutable mistake it would be even less of a difference between low and high dollar incomes, which mean the fees (if any) for early repayment would be negligible on large loans as a proportion of their total amount.

I am sure Paradox has done this to 'balance' their already exploitable loan system or something, but it's annoying and just not in line with economic logic or actual banking practices.

[Kushan]

I don't think I've ever read "offers realistic banking practices" as a feature in the game description.

[Cheimison]

I don't think I've ever read "offers realistic banking practices" as a feature in the game description.

Yes, but it's unfair to the player (and even the stupid AI). And it is supposed to be a grand strategy game that operates in some vaguely historical way, and obvious violations of basic economic law are pretty bad. It would be better if they just let you run a deficit and charged you for it, rather than having loans which don't actually operate like loans and interest that isn't actually interest.

There is a game with realistic banking practices, Patrician III. For a fairly abstract strategy game it's pretty accurate to how small free trader cities in the Baltic actually operated.

[Yskonyn]

I think these complaints belong on the Paradox forums. We can hardly do a thing about the game here. :)

[Cheimison]

I think these complaints belong on the Paradox forums. We can hardly do a thing about the game here. :)

Haha, I don't think they really care. They still allow you to build 1000 division armies in the 16th century, they clearly accept the gonzo/arcade elements in their system.

Really I just think it's bizarre that they did this in the first place. I am sure Paradox has taken out loans before, they must be aware that early repayment is, if anything, encouraged by lenders. And as far as historical records go, we have MUCH more detail on the financial and business practices of the renaissance than we do on its warfare.

If I was really bothered by this I would just mod it, but frankly I am so rich in the game that I hardly ever take out loans in the first place.

Most hardcore sim: https://www.cesim.com/simulations/cesim-bank-management-simulation-game

[undercovergeek]

That's some niche nerd rage right there

[bbmike]

^You should hear mirth go off on meeples.  :-"

[bobarossa]

I'm pretty sure it wasn't that long ago that banks had you pay all of the interest for a loan during the early payments so that you were paying only principal towards the end.  This meant they got the same amount of money if you attempted to pay off the loan after about the half way point (depends on interest rate). 

[mirth]

^You should hear mirth go off on meeples.  :-"

Alex Kurtzman saved Star Trek.

[bbmike]

 :wow:      :timeout:  :pullhair:

[Cheimison]

That's some niche nerd rage right there

Well I know a bit about economics, accounting and medieval finance. Actually, medieval finance and commerce are literally hundreds or thousands of times better documented than military of the era (and actually accurate, since they WANT THEIR DAMN MONEY BACK, it's not just propaganda lol) so I KNOW I am right about this.
And it's true that some medieval loans did not have you make regular payments, but even so an early repayment would include the risk on the loan, the service fee and the current annualized interest only. For well known economic reasons lenders do not charge a full interest rate because then no one would ever repay early, which reduces risk for the lender. Especially when you're talking about gold sieves like royal courts.

[undercovergeek]

You should speak to bob - he was an actual medieval accountant

[bob48]

I'm not cheap though.

...despite what 'geek says...........

[Cheimison]

I'm not cheap though.

...despite what 'geek says...........

A Law Degree at Koln and the collar to prove it!