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So why is it so important to charge somebody well above the 10% interest rates over a scoring system that is broken. I mean come on, your going to give somebody %2 interest rate and cheap monthly payment vs somebody who has no credit or working on it a higher rate. When in fact most people bale on their monthly payments due to the rates that was given to them. Allowing somebody to make a $200 car payment with 2% vs $500 and %20.. who do think will default first? Would be easier if you just let them do the 200 a month to be fair with rest of the well off buyers. If that person is late, than charge a late fee as normal, but dont go jacking up their monthly payments and interest rate beyond their ability to afford.
I have made the wry observation that exorbitant interest rates on debt are self-fulfilling:
Higher interest rates inherently hinder repayment, as every dollar paid in excess interest is a dollar that cannot be applied to principal. Slower reduction of principal entails longer repayment times, thereby extending the duration of the debtor's vulnerability to income interruption and disruption of repayment.
i.e. higher interest rates increase delinquency and default rates all by themselves.
Just avoid paying interest on anything but a modest mortgage and/or a modest amount of student loans (necessary evil for some). It is worth it. I promise.
Sorry, you don't get to dictate how much risk someone is willing to take with their hard earned capital. If you don't want to pay high interest rates, protect your credit. Otherwise, your bad credit shows that you've most likely made poor choices in the past.
Not to mention that if someone actually signs the terms of an interest rate as high as you describe in the op, it just proves they haven't learned their lesson and still don't understand money. No one forces them to take extreamly high rate loans on rapidly depreciating assets.
It appears the OP is unfamiliar with acturarial tables.
It's all about risk. People with lower credit scores are statistically a higher risk. It has to do with the borrower being unreliable.
Would you personally lend money to me? I'm super responsible. I promise. ;-)
Of course someone who believes what the op does wouldn't have money to lend or understand the risk/pain of loss to someone's accumulated capital. If they did, they would suddenly be taking a very different tune.
Or they would understand that lending would be unavailable period to high risk borrowers if higher interest rate loans weren't possible.
Last edited by Thatsright19; 08-19-2017 at 09:50 PM..
I have made the wry observation that exorbitant interest rates on debt are self-fulfilling:
Higher interest rates inherently hinder repayment, as every dollar paid in excess interest is a dollar that cannot be applied to principal. Slower reduction of principal entails longer repayment times, thereby extending the duration of the debtor's vulnerability to income interruption and disruption of repayment.
i.e. higher interest rates increase delinquency and default rates all by themselves.
Higher risk borrowers inherently hinder repayment, and every dollar missed towards payments and interest is a dollar that cannot be used elsewhere by the lender. Reduced or Slower repayment entails longer repayment times, thereby extending the duration of the lenders vulnerability to debt writeoffs and opportunity cost of not applying their capital elsewhere.
but isnt the goal is to get your money back with out fear of having somebody repay you, when you know that your charging a over price interest beyond their ability to pay? wouldnt be easy to give them the same rate as a person that can easy purchase the items in cash.. Like i said, who will default faster? Most people default because they need the said item and are stuck with the high interest rate because you think they are a risk. Yes im sure their are plenty of bad apples, but when they apply for your loan, dont you do homework and see if they can afford your high rate or the lowest rate you can go? Because of high interest is why most go in debt, and im sure lenders love debt.. slave to debt is the new way of life i assume
Someone who has a bad credit score is a higher risk for the lender. They may default on the loan or file bankruptcy or something. You also have to think about the higher cost of dealing with a higher risk borrower; even if the person does not default, they might be late, meaning the lender has to pay someone to make collection calls, etc.
Sorry, you don't get to dictate how much risk someone is willing to take with their hard earned capital
LOL, you are too funny. Too big to fail banks are getting money from the Fed for free. Yes, thanks to this criminal system imposed by the Fed big banks are receiving money for free and then lending that same money to average Joe for 10% interest and more.
Big banks don't care about client deposits anymore and why would they when they recieve money from the Fed virtually free. Large corporations and the rich are another group who gets almost free money, everyone else is played and screwed by the Fed.
Land of Debt slaves, that is what our country has been turned into. The sooner this entire system implodes, this status Quo protection, the better majority of American citizens will be. Old Money from the East Coast and Texas Oil is running this country and protecting status Quo. Majority of Americans are just victims and have no future unless the status quo is ended and major change in this country is implemented.
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