Here is a simple truth about the lending and borrowing relationship- it is always characterized by a single factor: Risk.
Here is a simple truth about the lending and borrowing relationship- it is always characterized by a single factor: Risk. Both lender and borrower are taking a risk. The lender wants to recover the asset and turn a profit. But both are really just guessing at what might happen. That is why the lender has such a high interest rate, to get their losses hedged right away. The bank does not know if you will get laid off or die in a plane crash. But they are taking a smart risk.
What the average Joe does not get, is that the bank makes money precisely because there is a risk. Otherwise they would have no way of being able to offer such a unique service. So that when the consumer cannot repay, they start to associate their position with feelings of inadequacy. They got dealt a bad hand, and they feel like they are a bad person because of it.
These feelings only serve to cloud your judgement. They are not the reality of the situation. If you are feeling them, you should think about reconceptualizing the way you view debt.
The creditor wants you to pay not for MORAL reasons, but for a cold, profit driven calculus. They want to make a profit, not make you feel bad.
But many debtors know you feel bad, so they manipulate you into paying longer than you have to. Don’t be deceived. Pay for the right reasons. Or default for the right reasons. But don’t let your emotions get the best of you.
Here is a little fact about credit: The creditor knows you won’t repay. How? Because to them you are just a statistic. If you don’t repay, they have accounted for it. If you do, they accounted for that too. They have done this for generations and they are exceedingly good at it.
Now this does not mean you should not pay your bills. If you can honestly pay, by all means, keep paying them. But if there is a time in your life where there is just no way and no how, don’t feel bad.
Remember, the bank or loan officer, wanted you to go into debt. it made sense for them.
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