ANSWERS: 1
  • If they cannot recover any money from the borrower - and lenders will use every legal method available to recover their money - the debt is written off as a cost of doing business. These losses affect the interest rates that are paid for loans. The more losses, the higher the rates. This is why credit cards have usuriously high rates: they are advancing you an unsecured loan. Their risk in doing so is quite high, since more people default on credit cards than with any other type of loan. You benefit the most from the system if you pay off your credit cards in full, every month.

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