FUNKMAN
01-12-2005, 07:50 PM
Reef's Credit Score thread got me thinking about this:
When someone applies for a car loan or personal loan and has a mark on their credit, they are charged a higher interest rate, why?
I've heard it is because there is more of a risk that this person with a 'bad credit score' has more of a chance to not pay his bill
My point is: If the people providing the loan have some fear that the people they are lending the money too may not pay then does it make sense to charge them more money than someone they feel will pay their loan back?
Wouldn't the loan company just be increasing their fear and actually heightening the risk that the loan will not be paid?
<img src="http://img.photobucket.com/albums/v53/monster6sixty6/guests/fm3_sig.jpg">
When someone applies for a car loan or personal loan and has a mark on their credit, they are charged a higher interest rate, why?
I've heard it is because there is more of a risk that this person with a 'bad credit score' has more of a chance to not pay his bill
My point is: If the people providing the loan have some fear that the people they are lending the money too may not pay then does it make sense to charge them more money than someone they feel will pay their loan back?
Wouldn't the loan company just be increasing their fear and actually heightening the risk that the loan will not be paid?
<img src="http://img.photobucket.com/albums/v53/monster6sixty6/guests/fm3_sig.jpg">