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>Borrowers already have skin in the game. Lenders have none That's absolutely false. Lenders have skin in the game - they run the risk that the borrower fails
by someguydave 10y ago
>Borrowers already have skin in the game. Lenders have none
That's absolutely false. Lenders have skin in the game - they run the risk that the borrower fails to pay back the principal. That's why they charge risky borrowers more interest.
If lenders truly had no skin in the game then loans would be nearly interest free.
- HarryHirsch 10y agoIf lenders truly had no skin in the game then loans would be nearly interest free. There's a testable hypothesis there: did rates for student loans go up much when they were made non-dischargeable? I'm too lazy to check.
- someguydave 10y agoIt's a good point. I failed to caveat that my prediction might not be true: - in a situation where other "risk-free" investments are more profitable - in a situation where the supply of money lent is regulated or controlled enough to fail to bring down rates.