The Solution to Loans and Interest

The real issue with any kind of loan — from payday loans to home loans to student loans to credit cards — is the unending accumulation of interest.

People have no problem with the obligation to pay back money they borrow. And most understand and accept that interest is, ultimately, just the fee you pay to use someone else’s money.

But that fee — meaning the total accumulated interest on any loan — should never be allowed to exceed the amount of money originally borrowed.

After all, the right to use any amount of money could never be worth more than the amount of money itself.

So it can’t honestly be argued that anyone should ever have to pay back more interest than principal. It is flatly unethical for any lender to get back from a borrower three or four or more times what they borrowed in the first place. Such practices are called predatory for a reason. And, as in all things, they disproportionately afflict the most vulnerable among us.

So it should be made law that no one ever has to pay back more than twice the amount of money they originally borrowed, no matter how long it takes them to do so.

Of course, if this were the law, unchecked lenders would seek to run up interest rates to astronomical levels in order to reach that maximum possible double-the-principal amount as quickly as possible.

So there would also need to be caps placed on the maximum interest allowed in any given situation. Likely a simple formula based mostly on the amount borrowed and the expected time to repay would serve in any case.

Dull the predator’s teeth and claws and more of their prey will live fuller, happier, more productive lives.

And that — at least in this metaphor– will lead to a better, healthier ecosystem for us all.