Odd, those with less money, those who've hit hard times and their credit scores took a hit, are charged more.
Would it not make more sense to just lend them less and give them a break on these loan shark interest rates? It seems charging those on the lower ends of the ladder higher interest rates is down right punitive.
I'll be called anti-capitalist, but its my opinion what the banks, credit cards companies and lenders charge for loans and interest rates is criminally obscene.
Alternatively, charge everyone the same interest rate regardless of credit. But raise the rates on everyone so that the expected losses from non-creditworthy borrowers is covered adequately. Example: Poor credit risks may pay 15% APR on an auto loan and good credit risks may pay 9% on an auto loan. If we charge everyone 21% on all auto loans the losses will be covered. Kinda like Obamacare for the credit sector of the economy...
And when those loans go bad, as they occasionally do, the lender is the one who eats the loss. A person with a low credit score who defaults on a loan still has a low credit score.
Generally speaking, loans to people with low credit scores are limited both in term and in loan-to-value ratio (meaning they need a greater downpayment on a vehicle to qualify for a loan, if you are not familiar with the term).
A good lender will be able to see when someone is down on his or her luck, especially if they are at a community bank or credit union as opposed to a big bank. It's not unheard of for some of those people to get some slack.
Who puts a gun to their heads and forces them to take the loan?
You are not anti-capitalist, just ignorant of what consumer lending is all about. It is about making money through interest and fees. It is also about getting paid back, but not too soon.
The same people who have poor credit are also the banks biggest profit margin. They are the ones that pay late charges of $35 each payment and interest on consumer finance loans, some of which have LEGAL rates as high as 28% per year or more. They are also the same people who go to pawn shops and pay 36% interest on consumer collateral based loans. They gladly go to Rent-A-Center and pay three times over for a TV so they can have it today instead of saving the $10 a week for a few months and buying it outright.
Without the ability to rent this money, regardless of cost, most of these people would have nothing as the concept of delayed gratification is a foreign to them.