Pluralistic: Daily links from Cory Doctorow
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It may strike you as weird, but lenders love to lend money to poor people who will have trouble paying back their loans. Obviously, lenders want to be repaid, and obviously the more money you have, the easier it is to settle your debts, but (paradoxically) that means that if you have a lot of money, you expect to pay less to borrow.
In other words: because poor people have a higher likelihood of defaulting, their loans come with higher interest rates and worse terms. Debt is steeply regressive: the less money you have, the more you're expected to pay. The industry term for this is the "risk premium": the riskier a loan is, the more it costs the borrower.
Lenders are always seeking the highest possible return on their loan-books, which makes that "risk premium" awfully tempting. Why loan $1m to Elon Musk at 0.5% interest when you can make 10,000 $100 payday loans to non-union Tesla workers on food stamps at 1,000% interest?
