Thread: Interest
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Old 03-16-2017, 07:16 AM
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Originally Posted by PickleBottom View Post
Just to clarify;
Option 1 - the lender does not inherit any risk and therefore no need for interest.
Option 2 - the lender does inherit a risk and therefore charges interest, but this interest increases the risk (the risk of a person defaulting on their loan), which should increase the interest, and this would approach a point where every person reaches their particular threshold where they are unable to pay back both the principal and interest, and at this point the risk reaches certainty. Therefore if the lender is risking their money they should charge infinite interest.

It would be like an insurer placing lightning rods within haystacks covered by their own fire insurance.

But from what I understand, you believe that there is the third option;
-interest has nothing to do with risk but is rather a price a borrower is willing to pay at a rate which ensures the lender makes a profit.
I don't have to "believe " I'm telling you how it actually works in the real world. If you don't believe me go down to your local bank and speak with them.
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