How Loans Serve as a Lesson in Intuitive Rationality
By : Alex Category : Finance
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People, often other scholars, complain constantly that economics is an unintuitive process to explain something people do every day and credits people with overly complex thought processes and rationalizations. For example the debate between value and liquidity, that liquidity can be worth money in and of itself. The translation of all that is that basically, having X dollars in your savings account is less useful than having X in your checking because you can’t use your savings as frequently as your checking. Do people act that way? Well considering the amount of people who take out loans or act in other manners that trade the total volume of monetary worth for liquidity it would seem that they do. Loans, banks, even pawn shops all offer this service to people and at such rates that they can be found across the country even in smaller towns like Bensenville, IL.

When someone takes a loan they take it on knowing they will have to pay interest. Not everyone appreciates how much interest there will be, but they take it on knowing that interest will accrue over time. They know that the money they get will be less than the money they have to pay back; almost everyone realizes that the money they pay back will have increased higher than inflation.

Why bother taking a loan in Bensenville, IL then? It’s some money now for a greater amount you have to pay back. It seems like a losing proposition doesn’t it? But there is logic to it. The most common types of loans are probably student loans and mortgages. Both help illustrate a simple point. People generally do not have enough cash on hand to buy a home at once, but with a mortgage they can buy the house then pay it off. Having that liquidity allows them to buy the house; it also means that they can pay just their mortgage amount instead of trying to save for a house while paying for an apartment. With a student loan the hope is that the education will be worth more than it cost, and knowing that it would be hard to save up enough to afford a college education, especially working the sorts of jobs you can get right out of high school.

Next time you see a place offering pay day loans, or any other type of loan in Bensenville, IL, and you wonder why people pay so much interest for sometimes small loans, keep in mind the value of liquidity. If you need cash now to repair a car, it’s worth the interest to get it now. If you can’t get to work you can’t get the money to pay for the repairs. Loans and loaning agencies exist across America, and even into the small towns like Bensenville, IL because of people’s intuitive understanding of the benefits of liquidity.

 

Action Pawn and Loan is based in Franklin, IL, it offers quick Loans and accept anything suitable as collateral. If you need quick money to take care of a sudden expense or if you’re just trying to get cash for gold and other old trinkets lying around the house, they can help you. Action pawn and Loan services the surrounding area including towns like Elmwood Park, IL and Bensenville, IL they can be found online or via phone at 847-288-9088








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