Why do people with less money end up paying significantly more for products than if you had the money to buy it out. Ie a 40,000 dollar loan at 15% end up costing most people upwards of 70,000.
Why is everything more expensive if you are poor?
byu/altcoinbillionaire inAskEconomics
Posted by altcoinbillionaire
2 Comments
Are you asking about why it’s expensive to buy everyday items on credit? Because poor people make for bad debtors – people who have less money are intuitively less likely to pay it back. So you charge them more to justify the risk.
Most products are priced identically.
Debt is priced by ability to repay. On average, the rich will have greater ability to repay than the poor. That said, if your credit score is excellent, you hit an effective ceiling on this fairly rapidly. The amount of credit you qualify for is lower than a richer person who also has an excellent score, but the interest rates level off pretty quickly.
If you are poor, you will have access to less credit than the wealthy for this reason.
However, that certainly isn’t *everything* unless you are wildly overusing credit.