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Well, let's discuss it. Why do riskier loans command higher interest rates, if not because the lender is making a calculated bet, and the borrower knows that h
by alejohausner 6y ago
Well, let's discuss it. Why do riskier loans command higher interest rates, if not because the lender is making a calculated bet, and the borrower knows that he might default?
- zajio1am 6y agoThe fact that risker loans command higher interest rates and lenders making calculated bets is obvious, but it does not follow from it that borrowers do not have moral obligations to repay loans. Risk-surcharge just reflect the fact that even if borrowers have full honest endeavor to repay debts, they may sometimes fail. If we considered to be ok to not repay debts because a borrower just does not feel obligated to do so (and does not need more loans from that lender), then risk-surcharge would be extremely larger.