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Old 01-11-2018, 02:06 PM
 
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So seems were all judge by a score system and the interest rate is base on that. With that being said, what is the purpose of jacking up a interest rate on somebody vs just having a flat bottom rate for everybody? Pro and con..

 
Old 01-11-2018, 02:08 PM
 
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The reason is risk. The greater the risk to the lender the higher you charge. Generally speaking this is a basic easy to understand concept.
 
Old 01-11-2018, 02:10 PM
 
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huh ? are you talking about a credit score and a loan ? if it is , then like anything in life , those that are a higher risk have to pay more to cover that risk .

if you have already demonstrated an inability to pay or lack of want to pay or both , you should pay more , a lot more or perhaps not be given a loan at all . .
 
Old 01-11-2018, 02:11 PM
 
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Are you talking about interest rates in relation to credit scores?

That is simply risk versus reward, the higher the risk, the more reward.

If everyone had the same rate regardless of score, then there is no incentive (other than seeking approval) for keeping a good score.
 
Old 01-11-2018, 02:23 PM
 
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Quote:
Originally Posted by hitpausebutton2 View Post
So seems were all judge by a score system and the interest rate is base on that. With that being said, what is the purpose of jacking up a interest rate on somebody vs just having a flat bottom rate for everybody? Pro and con..

You’re free to loan out your money at a flat rate to anyone with a pulse.

For the other people with capital, they probably feel more comfortible pricing risk into their lending.
 
Old 01-11-2018, 02:23 PM
 
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Quote:
Originally Posted by boxus View Post
Are you talking about interest rates in relation to credit scores?

That is simply risk versus reward, the higher the risk, the more reward.

If everyone had the same rate regardless of score, then there is no incentive (other than seeking approval) for keeping a good score.
Just general.. What would hurt if their is a flat rate? You still make your money back plus some?

No incentive?
 
Old 01-11-2018, 03:21 PM
 
Location: East of Seattle since 1992, originally from SF Bay Area
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Quote:
Originally Posted by hitpausebutton2 View Post
Just general.. What would hurt if their is a flat rate? You still make your money back plus some?

No incentive?
You make your money back plus some only if the creditor pays you back. The better the credit the more likely they will pay it back. There is risk to any loan, but the lender is more willing to gamble if the potential reward is larger. My credit union actually lowers the interest rate as your credit score goes up over time. When a car manufacturer offers 0% interest it requires very strict credit qualifications, but people with lousy credit may still be able to buy a car - at 10% interest.
 
Old 01-11-2018, 03:28 PM
 
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Quote:
Originally Posted by hitpausebutton2 View Post
Just general.. What would hurt if their is a flat rate? You still make your money back plus some?

No incentive?
it would hurt plenty . no one wants to loan high risk people money for low rewards . why risk the money when you can give it to the high score people who demonstrated an ability to pay and a want to pay . i certainly would not loan a penny to a low score person .
 
Old 01-11-2018, 03:33 PM
 
Location: NJ
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Quote:
Originally Posted by hitpausebutton2 View Post
Just general.. What would hurt if their is a flat rate? You still make your money back plus some?

No incentive?
your score basically represents your history of paying back debt and your ability to pay back debt. so if you have a low score, there is a good chance the creditor wont get paid back. if you had one flat rate, then lenders would just have no choice but to deny credit to people with low scores.
 
Old 01-11-2018, 03:48 PM
 
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Quote:
Originally Posted by mathjak107 View Post
it would hurt plenty . no one wants to loan high risk people money for low rewards . why risk the money when you can give it to the high score people who demonstrated an ability to pay and a want to pay . i certainly would not loan a penny to a low score person .
So why not charge them a higher rate on interest since they have the ability to pay it back. So you bank on higher risk folks vs not making any interest on "good score"?
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