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Advantages And Disadvantages Of Consumer Lending

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Theoretical perspectives in regards to advantages and disadvantages of consumer credits There are a large number of borrowings that people can obtain and each type may have distinct advantages and disadvantages. The types of borrowings that will be examine here are those considered as contentious. First of all, one of many form of consumer credit that seems to have more drawbacks as compared to the benefits are subprime lending. According to Hendry (2007), subprime lending is a type of lending given to people who does not meet the lenders criteria such as small risk of default or delinquency. Therefore, considering the bank is bearing a higher risk, it seems fair that the borrowers are getting the chance to borrow even with higher interest …show more content…

Moving on to the drawbacks of subprime lending, any consumer loan that exhibit characteristics such as aggressive and deceptive marketing, ignorance of the borrower 's ability to pay, huge prepayment penalties, unnecessary provisions that do not benefit the borrowers, faulty underwriting and high interest rates plus excessive fees are considered as predatory lending (Hill and Kozup, 2007). The fact that many subprime lending are predatory lending is not only supported by how well the characteristics matches each other but it is also proven through reports by the consumer in the 1990s which contributed to evidence that they were abused through high pressure sales tactic, predatory interest rates, high fees and prepayment penalties , and falsification of income and valuation document (Hill, 2007). It is so disturbing that the lenders are actually …show more content…

From the advantages and disadvantages of consumer credit, we can definitely see that although there are many issues that are controversial, nonetheless they do benefit the consumers in some ways. Besides, even though there are many people enjoying the advantages, it seems like there are a lot more people who are suffering from it. Sadly, another thing that can be seen is many lenders are just minding about how much more profit they could make rather than thinking whether or not they are acting 'ethically '. But in the end, we cannot just put the blame one party because the choice to enter into any contract is still made by the borrowers and not the lenders. Hence, after looking at so many different issues it can be concluded that provision of consumer credit will only benefit the society until a certain

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