Lenders loan money. They try not to give it away. Places that give it away are called charities. If you fall behind on your payments, you will learn quickly that banks aren’t charities. Lenders also like to look at your payment history. Some people pay every payment on time. Banks love these people. They are considered low risk. Their credit scores are high. Everyone smiles when they think about these people.
Some people pay every payment. They’re just not really very picky about when they get it paid. Banks kind of like these people because they get their money and make a little extra from late fees. They create extra work for the bank employees, but at least they get more money for their troubles.
Other people eventually pay the loan, but they have to chase them down to get it and end up writing off any late fees. Banks really don’t care much for these people. Lenders don’t make much from these people because of the high cost of recovering their money. Sometimes, they can even lose a little.
The last group, make a few payments and move out of state. The bank will be fortunate to ever hear from them again. They will usually write off the loan and eat the losses. Banks hate these people. They would rather use their money for a bonfire than lend to them.
Lenders believe that if you have a stable residence, job, and credit history that you are a good risk. They like it when your assets outweigh your liabilities. Banks at least want the two to be close enough to wave at each other. If your liabilities are too high, you won’t get many loans unless you have collateral, and the loan erases the other debt. Banks make most of their profits by lending money. As loans are repaid, the incoming payments fund future loans. Borrowers who don’t pay correctly disrupt the banks business practices.