Tuesday, April 2, 2024

People Who Do Not Understand How Poor People Live

4/2/24 Newsweek article about the CEO of a company that put up the $175 million bond so that Trump could appeal the banana republic court decision.

They mention a number of accusations against Hankey's company with no evidence that the accusations are valid.  Worse, he is a "subprime auto lender."

For the top 10% of earners, they will never be in a position of needing to be a subprime auto borrower.  

A hypothetical: you work at a blue collar job.  You get paid not terribly well.  You have made a few financial mistakes along the way and you have a lousy credit score.  You may just be starting out in life and have no credit history.  (Been there, done that.)

You need a car to get to work.  Your 20-year-old beater has given up the ghost.  You can afford $150/month for a car loan. You really need a car to get to work, the grocery store, doctor for you and your family.  

You go to a bank or a car dealer selling nice cars.  They run your credit report and decide you are too risky a borrower.  

Shady Al's Fairly Reliable Rides has a $1500 best up but functional car for sale.  They go to a subprime lender who looks at your poor or non-existent credit history.  In exchange for the risk that you will fail to make payments, disappear with the car, leave it an unsaleable wreck, they charge a high interest rate.  If you manage to pay that loan each month, your credit history will improve or come into existence.  You are paying a high interest rate for the risk of default and because it will improve your score.

People born with a silver spoon in their mouth will never be in that situation.  They can hold in contempt the lender who is providing a needed service.

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