I want you to look at this post, then I will explain my position (as if you don’t already know)
I once tried peer to peer lending as one of the lenders. I wanted to see if it worked or not. I ‘invested’ $1000 in Prosper. Here is how I remember it working: a person applies for a loan. The application, along with the person’s pertinent financial information (Credit score, income, etc.) is listed. You as an investor can then offer to fund some of the loan. Once the loan is fully funded, the lenders offering the lowest interest rates are the ones who fund the loan. At the end of the bidding period, those people are the ones who ultimately fund the loan. All loans are for 36 months and are unsecured. Example:
Person wants to borrow $3,000.
Person A agrees to loan $1000 at 18 percent. Person B $2000 at 18 percent. Now that the loan is fully funded, others can come in and offer to fund it at lower interest. Person C agrees to lend $1500 at 16 percent, then Person D agrees to $2000 at 14%. In the end, the loan funds at 13.4%, with a monthly payment of $101.66. The total of all 36 payments for that $3000 loan is $3,659.79.
I decided to put $1000 into my account to see what would happen. (My first loan was for $50. I was repaid $35 of it) so I added more funds, and I loaned that money out to other people. The interest rates were all sky high, 14 percent or higher, and I didn’t choose a single person with bad credit. All had credit scores that were higher than 650. Two of the three of them had defaulted before the end of the first year. I only got back about $140 of the thousand I had invested.
That was 13 years ago. I have learned a lot about money, business, and finance since then. Now I know why they are charged so much.
Why? Because each and every one of those people had already tried to get a loan through a conventional process, and couldn’t. The reason was that they are all high risk borrowers. If a given pool of people has a 10% risk of defaulting on a loan, a lender has to charge enough interest to cover the cost of servicing the loan, plus enough to cover those who will default. The higher the chances are of default, the higher the interest rates need to be in order to make the loan financially feasible. If you have a 10% chance of defaulting, then the lender needs to charge that 10% to compensate for risk, another percent or two to cover office and other administrative expenses, and some for profit. You are now staring at 14 or even 16 percent.
Make charging interest illegal, then loaning someone money without interest means they might as well set it on fire. All lending will simply stop. I’ve posted on this enough times, that if you still don’t understand it, it’s because you are either obtuse or being deliberately contrary.
There are no opinions on this- it’s a mathematical fact. It’s just how money works.
7 Comments
Steve · February 10, 2026 at 5:52 pm
A lender and borrower agreeing on a fixed interest rate over the life of a loan is hardly usury. I don’t know what vehicle rates were like last year, but 10.6% seems high, unless he’s not a well-qualified buyer. In which case he shouldn’t be buying a $100k truck (unless he can put a good chunk of change down on it). What would the total interest charge be on $30-40k?
Now payday and title loan rates might be more accurately described as usury. But that gets back to your point about high-risk borrowers. People with credit scores of 800 probably aren’t going to a payday lender.
I don’t remember much from an economics class I took, but one thing I remember is that interest is the cost of money.
I suppose these people would be fine not earning interest on their checking, savings, and CD accounts.
Treefarmer · February 10, 2026 at 6:29 pm
The example you gave is why the idea of forcing all crdit card companies to charge no more than 10% just won’t work. That doesn’t mean that some, or many, credit card companins don’t charge way too much. There is just too much default and fraud expense for credit card issuers to charge 10% or less and make money. At a 10% rate or less, credit cards would only be issued to people with excellent to perfect credit scores.
ghostsniper · February 10, 2026 at 6:40 pm
Makes perfect sense to me. I believe there are a lot of people running around out there that have not been guided/taught by their parents nor the school systems on many things that used to be taught in the past. You can’t have your cake and eat it too. Live BELOW your means.
I forgot my name · February 10, 2026 at 6:54 pm
I’m not sure how willingly and knowingly financing a truck purchase can equal usury. The terms are the terms. He didn’t have to sign that agreement. But he did, willingly and knowingly, so it falls entirely on him. I have no sympathy for lack of foresight.
Slow Joe Crow · February 10, 2026 at 7:37 pm
Paying $120,000 for a brodozer at 10%APR for 7 years is stupidity not usury. The prime rate is 6.75% today so it’s not even that bad a rate but that price makes me wonder if there’s negative equity from his previous vehicle in that loan.
Now 20% interest might be usury but a few points above prime is the cost of doing business. The Twit just wants some clicks and outrage
J J · February 10, 2026 at 7:43 pm
Some days I just shake my head at the number of people who demonstrate their ignorance on the internet.
First, whose business, other than the guy who (stupidly) decided to buy a $111,00 truck and finance it, is it what the terms of the loan are? He didn’t have to do it, no one forced him.
Secondly, unless the two dumbasses in the post know exactly what the borrower’s credit history was how can they declare anything?
Usury:
1: the lending of money with an interest charge for its use
especially : the lending of money at exorbitant interest rates
2: an unconscionable or exorbitant rate or amount of interest
specifically : interest in excess of a legal rate charged to a borrower for the use of money
10.6% interest is neither exorbitant nor exceeding legal rates.
It's just Boris · February 10, 2026 at 8:18 pm
Taking out a loan is just a specific instantiation of a willing buyer and willing seller coming to a mutual agreement.