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>> and enforcement actions like that are the only reason that people make the loans in the first place. And also that delicious interest. You forget that the l
by mhuffman 9y ago
>> and enforcement actions like that are the only reason that people make the loans in the first place.
And also that delicious interest. You forget that the lenders already intend on getting something out of it. The reason they are getting interest at all is that there is a risk. If there was zero risk, there would be no need to pay interest.
- eonwe 9y agoOnly a part of the interest comes from risk. One important part is that if I were to give you 10$ in 10 years, it has less value to you than me giving you 10$ now (which is the difference between lending you lending to me and you not lending to me if you were 100% sure I would pay back).
- mhuffman 9y agoTime value of money is also based on risk. You are betting that there is an alternative sure thing at which you could earn some expected rate.
- baursak 9y agoThe part that comes from risk in this case is the biggest chunk of the interest though. If we assume that AAA-rated have "no risk".
- imiller 9y agoInterest is because of the time value of money and risk, not just risk.