Re: Leaflet through the letterbox - 739.9% APR
- From: "Andy Pandy" <spam8times@xxxxxxxxxxxxxxxxxxxxxx>
- Date: Mon, 1 May 2006 14:02:27 +0100
"john boyle" <john@xxxxxxxxxxxxxxxxxxxxxx> wrote in message
news:TTpOe6HkifVEFwwm@xxxxxxxxxxxxxxxxxxxxxxxxx
Presumably a lender using sky high interest rates like 25% per
fortnight envisages a
high chance of not getting his money back. Things may change to make
the prospect of
getting his money back more likely, as well as less likely.
The starting point is that he will get his money back,
The starting point for any loan is that there is a chance the lender doesn't get his
money back. Lenders routinely lend at higher rates to those who they think present a
greater risk of defaulting, do they not? That's because the starting point is x%
chance of them not getting their money back, and the greater x, the greater the
interest rate charged.
x could increase with time (eg if the borrower loses his job), or could decrease (eg
if he gets a better job, starts managing his finances better, or wins the lottery
etc).
any improvement
in that chance is irrelevant. The introduction of any chance of him not
getting his money back,
Introduction of any chance? Do you mean you've only ever lent to people who you can
100% guarantee can pay the money back?
or an increase in that chance must increase is
risk. This increase can not be offset by any perceived increase in the
chance of the loan being repaid.
Why not?
You've already said that when people asked for short term overdrafts you extend the
term - ie you are saying the chance of them paying back the loan is actually greater
over a longer term than it is over a shorter term!
--
Andy
.
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- Re: Leaflet through the letterbox - 739.9% APR
- From: john boyle
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