Debt these days - why do banks allow it?

[Postdog]

Well OK, I know the answer, it's because they make money. I'm just wondering if we have crossed the line though, because I think there is a big bubble going to burst, and indirectly it's people like me - responsible borrowers - who are going to suffer.

I'm 50. Credit was hard to get when I was young, back then you saved, and it's left a legacy with me in that I don't actually like owing money or being in debt. But we do have to borrow nowadays, and my debts are manageable - even so I actually "panic" a bit when I know I am going to struggle, or go overdrawn. Yet a guy at work is 24, is �10,000 overdrawn (Why and How!?) and owes another �15,000 on credit cards, and he isn't worried because if he can't pay, he can't pay - he'll just go bankrupt or do that agreement thing.

So in the end, he'll get away without paying, and mugs like me end up paying to cover losses made by him but actually allowed by the banks. I guess what I am asking is that does anyone else feel there ought to be stricter rules on lending, either voluntary or imposed? Why should banks and that be allowed to be so stupid in encouraging debt?

[WendyS]

Yes Postdog, I do feel that there should be far stricter rules on lending because in recent years the whole business has spiralled totally out of control. There is now a whole generation of people who do not understand the concept of only acquiring those things they can afford to pay for (mortgages excepted of course). I'm afraid it's the sign of an outwardly materialistic society who "must have" the latest fashions, the latest tehnological gadgets, the latest model car, etc. regardless of whether they can afford it or even need it. Most of us, if we're honest, could lead perfectly satisfactory lives without a lot of this stuff but modern life has become so competitive these days that people think they're a failure in the eyes of their peers if they don't have it. Actually, the people who live the most fulfilled lives are probably those who are so busy doing other activities they don't have time to worry about acquiring the most up-to-date material possessions.

[vehelpfulguy]

Although you are annoyed about the guy at work his debt problem will come back and haunt him.

Once he becomes a debt risk, If he decides to buy a house in future he may have trouble getting a mortgage.

He may even have trouble getting credit cards or loans in the future.

And to answer your question about why do banks and credit card companies allow it...well they make more money from the people who live with thousands on their credit cards and have large loans, than they lose in bad debt and fraud.

Seems unfair to the likes of you and I who look after their money, but unfortunately life is like that - benefit fraud, tax evasion, vat fraud, it goes on all the time.

If you knew how much fraud went on in the EU, which we all pay for, you would probably cry.

[WoWo]

I just wanted to agree with vehelpfulguy, while the person at work may be able to go bankrupt easily that doesn't make bankrupcy itself an easy thing to live with. People don't realise the problems they will face afterwards.