Loan interest is one of the main reasons we operate in a “line-must-go-up” society right now. If you loan out money and require that that much money plus a percentage be paid back, you are requiring that money spent returns back a surplus somehow. Making even is considered a failure in this system.
There’s nothing wrong with that in theory. It’s just a way of making sure resources are being used in a productive way. But it doesn’t actually work that well.
You have a point, but originally interest was both compensation for the lander for offering you the loan, and a way to mitigate risk in case you fail to pay. Without interest, why would anyone lend a random stranger some money? Interest is basically the only things that props up an unsecured loan.
Generally you would loan someone money without interest because the result would be mutually beneficial. We already do this in smaller social circles like our families, and then our close friends. The problem is that most lenders arent local and dont live in the community. They have no shared interest with the borrower.
In some cases communities do come together and raise funds interest free, and use them for something that benefits society in some way, we just wouldnt describe it that way normally.
Loan interest is one of the main reasons we operate in a “line-must-go-up” society right now. If you loan out money and require that that much money plus a percentage be paid back, you are requiring that money spent returns back a surplus somehow. Making even is considered a failure in this system.
There’s nothing wrong with that in theory. It’s just a way of making sure resources are being used in a productive way. But it doesn’t actually work that well.
You have a point, but originally interest was both compensation for the lander for offering you the loan, and a way to mitigate risk in case you fail to pay. Without interest, why would anyone lend a random stranger some money? Interest is basically the only things that props up an unsecured loan.
Generally you would loan someone money without interest because the result would be mutually beneficial. We already do this in smaller social circles like our families, and then our close friends. The problem is that most lenders arent local and dont live in the community. They have no shared interest with the borrower.
In some cases communities do come together and raise funds interest free, and use them for something that benefits society in some way, we just wouldnt describe it that way normally.