Sunday, 26 April 2009

Consumer interest rates unchanged

You won't see much evidence of the MPC's recent dramatic rate cuts in consumer interest rates. In fact, rates on personal loans, credit cards and overdraft have remained more or less constant for years.

I don't have much of a problem with that. Consumer lending is a risky business, with very default rates. Banks need to charge high rates to recover these losses.

But lets face it; personal credit is a mugs game. People who take out personal loans and actually pay them back are, in effect, subsidizing spending for those who default on their loans.

That is why it is better to avoid personal credit altogether.


dearieme said...

Oh I don't know. I took out a personal loan in 1974 and paid it back in depreciated currency.

Anonymous said...

But the interest your bank pays you is seldom more than half a percent now. So the people paying for the crunch are the idiots who saved, not the idiots who borrowed. Its lucky we are going to have hyperinflation, or I'd pull the cash out of the ISA and buy a cheap car.