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There's already an entire industry around making loans to people who cannot afford them. Of course, when the source of the funds is free to the banks, as with K

There's already an entire industry around making loans to people who cannot afford them. Of course, when the source of the funds is free to the banks, as with Kiva, the economics are somewhat altered. >responsible ones in the UK will steer customers to an installment-based product if it turns out they've needed to roll the loan over to the next month, more than a couple of times. Installment-based products are still debt, right? In fact, I would imagine that to be what's primarily sold to impoverished people who have little-to-no assets. Still, it's no-good when we're talking about debt for subsistence. My view is that it's better to simply give them the money. If the person could not afford to eat without help, what will change to make it so when he now also has an additional expense (debt)?

rahimnathwani 13y ago
Installment-based products are still debt, right? That's correct. However, as my original comment states, assessing ability to pay is part of underwriting. For an installment loan, this means checking (at least) that someone's monthly/weekly income is higher than their monthly/weekly regular expenses. The first loan I took was to buy a reliable car (for my journey to/from work). I could not afford to buy that car in cash, but could afford to pay it off within a couple of years, as my income was higher than my regular expenses, and I could use the difference to pay for the car. it's no-good when we're talking about debt for subsistence I agree. It's good mainly for revenue-generating assets (e.g. expanded inventory for your small shop) or cost-saving assets (e.g. a car which doesn't need frequent costly repairs).
- unclebucknasty 13y ago
  >I agree. It's good mainly for revenue-generating assets... Precisely.