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Funny.. I'm not a company and I have cash flow and resources to cover my bills.
As for your due dates, have you tried calling the bill collector to see if they will adjust your due dates? I've done this with many accounts in the past. Everything from a credit card to my power bill. Contrary to what you are trying to paint here, these companies want to keep you as a customer and will work with you to help make sure your bills are paid. Or you could just create a thread on some random forum complaining about these companies.... oh wait.
i have done that actually.. Its others in our world may not have that luxary.
Just general.. What would hurt if their is a flat rate? You still make your money back plus some?
No incentive?
Think of loaning money as gambling.
You have $10,000 to gamble with. You can bet $10,000, with a 90% chance of winning $1,000 (good credit borrower). Or you can bet $10,000, with a 10% chance of winning $8,000 (bad credit borrower).
But here is how it would be with your flat rate example.
You bet $10,000, with a 90% chance of winning $1,000 (good credit borrower).
You bet $10,000, with a 10% chance of winning $1,000 (bad credit borrower).
The risk is much higher, but the payoff/reward is the same.
You're never going to take the bet that has a 10% chance of winning $1,000 (i.e. loan money to a bad credit borrower), when you can make the same amount of money on a surer thing, the 90% chance of winning (good credit borrower). So in a flat rate environment, "what would hurt" is that people with bad credit would never get loans to buy anything because you can get the same return with a safer bet.
You have $10,000 to gamble with. You can bet $10,000, with a 90% chance of winning $1,000 (good credit borrower). Or you can bet $10,000, with a 10% chance of winning $8,000 (bad credit borrower).
But here is how it would be with your flat rate example.
You bet $10,000, with a 90% chance of winning $1,000 (good credit borrower).
You bet $10,000, with a 10% chance of winning $1,000 (bad credit borrower).
The risk is much higher, but the payoff/reward is the same.
You're never going to take the bet that has a 10% chance of winning $1,000 (i.e. loan money to a bad credit borrower), when you can make the same amount of money on a surer thing, the 90% chance of winning (good credit borrower). So in a flat rate environment, "what would hurt" is that people with bad credit would never get loans to buy anything because you can get the same return with a safer bet.
Good explanation, however charging a higher interest rate on the bad credit borrower forces them to pay on the loan longer than the good borrower. Doesnt banks and loaners make you pay interest first then principle? So if a person with %10 rate, mean 90 dollars is going to the principle, vs say %30 on the bad credit, so 70 dollars is going toward the principle. They are going to pay longer and thus make "feel like it never ends". Isnt the goal is to make your money back quickly as possible and is the borrower ideal to do the same?
Location: Formerly Pleasanton Ca, now in Marietta Ga
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Quote:
Originally Posted by hitpausebutton2
Yes you can pay most online, but not here. Water is money order mailed or pay at the city hall. Some things that are just beyond a person reach. I feel bad for those are paid monthly and here is a 300 dollar bill that is due one week before they get paid. Bills due dates dont line up with people checks and its no body fault. If your check to check, you do find a way but your sacrificing alot for a system that is corrupted from the start.
This is all the more reason to build a buffer so you are not living check to check and playing the timing game. The poster that mentioned someone eating soup for a week is drastic, but you gotta do what you gotta do.
The name of the game is cash flow. If you have a buffer you can ride out unexpected big bills. If yo uare living that close to the edge, isn't a house purchase going to be worse? Being late on a mortgage payment is pretty serious and costly.
Are you saying that you can't pay a water bill by check? I use online banking which either deposits money into the payees account or mails a physical check. Been doing this for years and never had a late payment. The only time I've seen where a check is not accepted is if you are late or missed a payment.
Huge difference.. . The company have cash flow and resources to cover their bill and payroll.
no that is a false assumption . banks sell loan packages to investors . they are bought by pension funds ,mutual funds etc . retirees like myself depend on those funds to eat , paying out and not losing value because of defaults or money not coming in when it is supposed to.
resources of others is not criteria for you paying what you owe on time . you made a deal taking the credit or loan to have the money paid in by a certain date . now you want to change the terms to i will pay it when i can .
this kind of thinking is going to ruin your financial life
............. Isnt the goal is to make your money back quickly as possible ..........
No, that is not the goal. You don't seem to have even the most basic understanding of how it all works. That information is easily available on line and often for free. If you really have any interest in loans, you might want to invest a few days hanging out on investment type websites, keep your mouth shut and just listen. Money works in a certain way. If you ever want to have any money, you must understand how it works.
Like I said, that information is out there for free if you would like to invest a little of your time to absorb that information.
One thing you very obviously do not understand about money is that the entire financial scene does not exist in any way shape or form to make your life easy or fair while you sit there doing nothing about it. No one, except maybe your own mother, cares about making your life easier and cheaper for you. You are pretty much on your own. You can figure it out or you can float through life doing nothing but complaining and complaining won't get you much.
The ENTIRE point of lending money is that the lender is RISKING their own money.
That's why it's called risk management/assessment.
You can't possibly think that it's smart for someone to offer the same deal to a poor credit individual as to someone who's a PROVEN credit individual.
Good explanation, however charging a higher interest rate on the bad credit borrower forces them to pay on the loan longer than the good borrower. Doesnt banks and loaners make you pay interest first then principle? So if a person with %10 rate, mean 90 dollars is going to the principle, vs say %30 on the bad credit, so 70 dollars is going toward the principle. They are going to pay longer and thus make "feel like it never ends".
Isn't the goal is to make your money back quickly as possible and is the borrower ideal to do the same?
The goal is to not lose your money and to maximize your return on investment.
Let's use your example numbers. You and I each have $1,000 to invest. There are 20 people that each want to borrow $100.
10 of the people have good credit, and there is a 90% chance they will pay you back.
10 of the people have bad credit, and there is a 50% chance they will pay you back.
The interest rate is flat. Each borrower is charged 10% interest ($10).
I choose the good credit people, and you choose the bad credit people.
9/10 of the good credit people pay me back. I earned $90 in interest + $900 in principal returned = $990. I lost $10.
5/10 of the bad credit people pay you back. You earned $50 in interest + $500 in principal returned = $550. You lost $450.
Now let's say, next time you charge the bad credit borrowers a different interest rate, rather than a flat rate. You decide to charge them 80% interest.
Again, 5/10 of the bad credit people pay you back. You earned $400 in interest + $500 in principal returned = $900. You only lost $100 this time. You mitigated your losses by charging the riskier borrowers higher interest, and didn't lose as much money this time. Now you are more likely to loan money to risky borrowers, because with the higher interest rate, you have a lower chance of losing your money.
Does it make sense now?
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