Question

Should lenders avoid loans to individuals with poor credit or a history of delinquency - or should they provide the loans at a higher rate knowing there is an increased risk of default? Granted, higher rates can sometimes result in a higher likelihood of default as repayments become too burdensome for the individual... so, perhaps a Catch 22 situation in which the lender creates the situation and promotes default... but, that goes back to the original question: should lenders avoid loans to individuals with poor credit or a history of delinquency?​

Answer 1

Answer)

Here I would definitely not encourage lending to loans to individuals with poor credit or history of delinquency as this results in more bad debts which inturn may lead the lenders to the crisis.Providing loans at higher interest rate would be useful in case where the risk is more but not in case where we know that there is default.Even if we want to provide loans to individuals with poor credit or a history of delinquency if there is enough security provided.