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Old 28-04-2012, 08:52 PM   #51
jon galt
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Join Date: Nov 2011
Location: OZ
Posts: 3,175
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Take the house building example from the MPE guy: A wants a house, B is a builder. A can't afford to pay the builder now, so promises to pay later. Is a promise to pay the same thing as actual payment? No. Of course it isn't. To start with, A might not be able to pay when he promises to. He might die. Then where will B the builder be? In addition, it is going to cost B money for B to do the work - travel, materials, his costs of living and overheads while he does the work. If B is willing to accept A's promise of payment at all, he's going to want more than if he was paid immediately. The difference between what B will accept now and what he will accept as a mere promise to pay represents the value of money over time (and the risk that A won't pay).
An excellent analogy and the way i see it that interest is more paying for a service, the loan more than any thing else. A service that is mutually beneficial or eles the borrower would not take the loan in the first place fe if i lose my cash and use my credit card to pay my trainfair home im more than happy to pay for the money lending service. That said i try to aviod debt at all costs however tempting that may be.

Last edited by jon galt; 29-04-2012 at 09:17 AM.
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