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Are you morally obligated to repay a loan that you take?[W:461]

Is there a moral obligation to repay money you borrow?


  • Total voters
    98
Am I to assume that you don't know the difference between a lease and a loan? Not being financially sophisticated enough to understand that loans and leases are completely different things in all regards would explain all your confusion on this matter.

They're both promises to pay a certain amount per month over a defined term of years. The agreements are both secured by an asset, both agreements have default provisions, etc. One is a house, one is a car - that's an important difference.

So the standard is it's moral to break a contract that contains a promise to pay if the promise to pay is structured as a lease, but IMMORAL to break a promise to pay if structured as a loan. Interesting. So if I have a car loan of 60 months, and at month 22 I'm drowning etc., it's immoral to turn those keys in because it's a loan and not a lease? I'm not seeing the moral distinction there myself.
 
You've spent several posts telling me why you WILL NOT articulate an objective standard for breaking contracts and why I'm stupid for asking.

Why not just explain your standard? It's a simple question.

My standard is fairly simple - the golden rule. I expect the lender to maximize profits according to the amoral terms of the loan contract, and my obligation is the identical standard - to maximize my own financial situation. With a personal, unsecured loan, my 'security' is my integrity, and so I will go to great lengths to repay that loan even when it's contrary to my financial interests.

See, not so hard to do....

People like you are the reason that the government should NEVER pressure banks to lower lending standards and downpayment requirements. The best defense against unethical borrowers is a large downpayment (or a minimum of 20% equity) in the property that is security for the loan.

By the way... next time I hear you bashing businesses for unscrupulous, immoral, unethical, self-serving behavior, I'll remind you that (if your accusations are correct) they're acting just like you do.
 
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They're both promises to pay a certain amount per month over a defined term of years.

Leases and loans are completely different. I'm with Tres Borrachos. The degree of financial ignorance you are demonstrating makes it impossible to have a reasonable discussion with you. Educate yourself and maybe one day you'll be able to discuss finance without such embarrassing displays of ignorance.
 
Depends on the overall character of the economy and its basic funding tenets. Where money is essentially identical with debt, or where living wages can only be secured through loans, there is no moral obligation to repay if it becomes impossible for the person who has taken the loan to do so.

If, on the other hand, money tracks resources and is distributed equitably, there is a moral obligation to repay a loan which, I would suggest, extends even to family members of the person who takes the loan.
 
Depends on the overall character of the economy and its basic funding tenets. Where money is essentially identical with debt, or where living wages can only be secured through loans, there is no moral obligation to repay if it becomes impossible for the person who has taken the loan to do so.

If, on the other hand, money tracks resources and is distributed equitably, there is a moral obligation to repay a loan which, I would suggest, extends even to family members of the person who takes the loan.

And where is it that "living wages can only be secured through loans"?

And what is the rest of that about "if money tracks resources and is distributed equitable" supposed to mean? What you said, as stated, isn't making sense.
 
:lamo :lamo

Please bother someone else. I don't get paid to educate people on here about basic fundamental best practices of money and life management. And I'm way too tired to explain my posts to someone who can't understand them.

I had to leave the thread. The way people tried to rationalize and justify their reasons for not (necessarily) paying showed they used excuses in life to prop up their behavior. Ignoring the fact that cheating, fraud, and non-payments are not included in business models and spread out so that everyone else had to pay for their defaults. Rationalizing that 'big business didnt feel it' or 'it was too small for people to notice.'
 
People like you are the reason that the government should NEVER pressure banks to lower lending standards and downpayment requirements. The best defense against unethical borrowers is a large downpayment (or a minimum of 20% equity) in the property that is security for the loan.

We've had this discussion and in my world the lenders were BEGGING borrowers to take out liar loans, NINJA loans, negative amort. loans, 110% of principal loans, home equity loans to finance a trip to Disney World, a new car, etc. And all along the way the lenders paid out massive bonuses, reported record profits, etc.

By the way... next time I hear you bashing businesses for unscrupulous, immoral, unethical, self-serving behavior, I'll remind you that (if your accusations are correct) they're acting just like you do.

As I've said, we have never failed to repay any loan, don't have car loans, and we paid off my mortgage about a decade early. So what we DO is pay our obligations on time, always.

And what I expect is companies will act in their own self interest, period. It's why I don't wish they'd pay higher salaries when the market rate for a e.g. Walmart worker is $8.00. They WILL pay $8.00 and they WILL force my state to cover Medicaid and food stamps for many of them. Walmart managers don't consider morality in that decision, or to keep 2 people part time instead of 1 full time, etc.

And lenders sure as hell aren't making moral decisions when they extend a loan - they're maximizing profits/bonuses/share price, whatever. I see no reason why borrowers should be held to a higher moral standard than our 'free market' businesses.
 
Leases and loans are completely different. I'm with Tres Borrachos. The degree of financial ignorance you are demonstrating makes it impossible to have a reasonable discussion with you. Educate yourself and maybe one day you'll be able to discuss finance without such embarrassing displays of ignorance.

They're just not "completely different." There are tax and GAAP rules that draw fairly arbitrary lines around what kinds of transactions qualify as "leases" and which may be called "leases" but are disguised loans, and vice versa. The differences are a matter of degree not kind, and parties entering into the agreements have to be very careful that their "lease" payments are fully deductible instead of capitalized and treated like a loan with principal and interest components, and whether the remaining payments on the lease/loan show up on the balance sheet as a liability or just in a footnote to the financials.

Sheesh, don't you all have better arguments than childish insults? Pretty lame. I'm asking a simple question - what is/are the objective standards you're using. I guess it's not that simple....
 
Fundamentally, it seems to me that most liberals believe that helping the needy is the most fundamental aspect of morality. That's what "good" is to us- helping the less fortunate.

The the right, it seems like "morality" is more like "obedience" or "loyalty" or something similar. Conservatives are instinctively rule-followers, so they've created notions of morality that are centered around obedience.

Really, it isn't that one concept is right and the other wrong. It is just how we were raised I guess. But, I would suggest that you just play it through in your head. Is a world where people are more subservient to the powerful really a better world? Wouldn't a world where the needy suffered less be a better world? It just doesn't really compute for me how you could not see that. But, yeah, I guess mostly it is just how we were raised. Liberal parents praise their kids when they help out the kid that's getting picked on, conservative parents praise their kids when they sit quietly during church, and sooner or later, we think those things are the most important things I guess.

This isn't the first time I've talked with a conservative. You guys don't hide it. But, hey, let me just ask you if you think I'm incorrect- do you believe that you have a moral duty to help the poor and sick?

This wasn't addressed to me, but I would like to answer your question.

Yes, I have a moral duty to help the poor and sick when it is obvious that such need my help and I am in a position to do so.

But. . . .

I have no moral basis to require YOU to help the poor and sick, most especially when I then feel righteous because I forced you to do it.

And whether I help the poor and sick or you help the poor and sick, neither of us have a moral basis on which to steal or forcibly take the money from somebody else to do it. And neither of us have a moral basis on which to decide we don't have an obligation or moral duty to repay money we borrow on anybody's good faith just because we want to use the money for something else or think the money will do more good elsewhere.
 
This wasn't addressed to me, but I would like to answer your question.

Yes, I have a moral duty to help the poor and sick when it is obvious that such need my help and I am in a position to do so.

But. . . .

I have no moral basis to require YOU to help the poor and sick, most especially when I then feel righteous because I forced you to do it.

And whether I help the poor and sick or you help the poor and sick, neither of us have a moral basis on which to steal or forcibly take the money from somebody else to do it. And neither of us have a moral basis on which to decide we don't have an obligation or moral duty to repay money we borrow on anybody's good faith just because we want to use the money for something else or think the money will do more good elsewhere.

None of that stuff about "stealing" or "forcing others to help" and whatnot connects with me. We are all deciding, together, how much of our resources to pool and what to do with those resources. We're all deciding it together, we're not forcing somebody else to do something.
 
If you think there is any correlation between a contract on your home and a cell phone contract, you aren't being serious in this discussion.

for purposes of discussing the topic of this thread, the morality of financial repayment, the link should be obvious
 
I had to leave the thread. The way people tried to rationalize and justify their reasons for not (necessarily) paying showed they used excuses in life to prop up their behavior. Ignoring the fact that cheating, fraud, and non-payments are not included in business models and spread out so that everyone else had to pay for their defaults. Rationalizing that 'big business didnt feel it' or 'it was too small for people to notice.'

Oops, should be ARE included in business models.
 
And neither of us have a moral basis on which to decide we don't have an obligation or moral duty to repay money we borrow on anybody's good faith just because we want to use the money for something else or think the money will do more good elsewhere.

I agree, if we borrow money based on anyone's "good faith" then we have a moral obligation to repay the loan. But a loan in a commercial setting, such as a mortgage, isn't being made on good faith. It's a business contract, and that contract has collateral, mortgage insurance in some cases, remedies in the event of default, etc. I've just not heard any explanation why this contract is fundamentally different than any other.

I'm watching basketball - our coach is under a five year contract. He promises recruits he'll be their coach next year, and the next. etc. But if he gets a better offer, he'll leave, the next school will pay a large penalty for breaking that contract, and not one person will assert he has a moral obligation to harm his family's financial future and stay at the local university. Where is the principled difference between that and defaulting on a mortgage? Would any Fortune 500 company citing morality or ethical principle remain in a contract, repay a loan, if it's in the interests of shareholders to terminate the contract or default on a loan? Of course not.
 
I agree, if we borrow money based on anyone's "good faith" then we have a moral obligation to repay the loan. But a loan in a commercial setting, such as a mortgage, isn't being made on good faith. It's a business contract, and that contract has collateral, mortgage insurance in some cases, remedies in the event of default, etc. I've just not heard any explanation why this contract is fundamentally different than any other.

I had to leave the thread. The way people tried to rationalize and justify their reasons for not (necessarily) paying showed they used excuses in life to prop up their behavior. Ignoring the fact that cheating, fraud, and non-payments are included in business models and spread out so that everyone else had to pay for their defaults. Rationalizing that 'big business didnt feel it' or 'it was too small for other people to notice.'

No one said businesses are moral. That's not what the OP asked. Businesses are based on law and contracts. Not morality.
 
I agree, if we borrow money based on anyone's "good faith" then we have a moral obligation to repay the loan. But a loan in a commercial setting, such as a mortgage, isn't being made on good faith. It's a business contract, and that contract has collateral, mortgage insurance in some cases, remedies in the event of default, etc. I've just not heard any explanation why this contract is fundamentally different than any other.

I'm watching basketball - our coach is under a five year contract. He promises recruits he'll be their coach next year, and the next. etc. But if he gets a better offer, he'll leave, the next school will pay a large penalty for breaking that contract, and not one person will assert he has a moral obligation to harm his family's financial future and stay at the local university. Where is the principled difference between that and defaulting on a mortgage? Would any Fortune 500 company citing morality or ethical principle remain in a contract, repay a loan, if it's in the interests of shareholders to terminate the contract or default on a loan? Of course not.
I criticize coaches and players all the time for wanting to either break a contract and/or renegotiate. If anything, this is a scenario where the team/business has more moral integrity than the coach or player that everybody loves. (That's the rub, isn't it? We like the player/coach, just like we like ourselves, so we're willing to rationalize for them.) If the player or coach bombs, the team is still expected to pay, and they do. Why don't we expect the same level of integrity from the player or coach?

They want the security of the long-term contract when they sign it. Maybe if they want flexibility they shouldn't sign a long-term deal and go just 1 to 2 years at a time. I would approve if teams/businesses started denying these requests. Both sides should be held to their negotiated deal. If they don't want to be 'stuck', they should sign shorter deals.
 
non-payments are not included in business models and spread out so that everyone else had to pay for their defaults. Rationalizing that 'big business didnt feel it' or 'it was too small for people to notice.'

It is a bit more complicated than that because of credit ratings. How much extra a person needs to pay to cover the cost of defaults depends on their credit rating which in turn depends on their record of making payments on time. If you default, you don't actually change what anybody else pays, you just change which payment tier you are in going forward. Regardless of if there are 10 million low credit borrowers and 1 million high credit borrowers, or vice versa, low and high credit borrowers still pay the same. If one person- or 10 million people- move from the high credit pool to the low credit pool due to a default, that doesn't change how much people in either pool pay. In fact, the person who defaulted will nearly always pay far more to the lenders in the end than they gained off the default.
 
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It is a bit more complicated than that because of credit ratings. How much extra a person needs to pay to cover the cost of defaults depends on their credit rating which in turn depends on their record of making payments on time. If you default, you don't actually change what anybody else pays, you just change which payment tier you are in going forward. Regardless of if there are 10 million low credit borrowers and 1 million high credit borrowers, or vice versa, low and high credit borrowers still pay the same. If one person- or 10 million people- move from the high credit pool to the low credit pool due to a default, that doesn't change how much people in either pool pay. In fact, the person who defaulted will nearly always pay far more to the lenders in the end than they gained off the default.

Bull****. I agree that alot of business is handled like politics but the fact is...fraud, default, etc is spread out among others.

And if the person defaults or is successful in their fraud...how are they paying?

Now granted, of course businesses have penalties written into those loan contracts. However legal costs, are also passed on. And if the person defaulting declares bankruptcy for example...there is not more to squeeze from the stone.

But the businesses have...as you even pointed out...created business models so that they do not pay or lose profit share.
 
Bull****. I agree that alot of business is handled like politics but the fact is...fraud, default, etc is spread out among others.

And if the person defaults or is successful in their fraud...how are they paying?

Now granted, of course businesses have penalties written into those loan contracts. However legal costs, are also passed on. And if the person defaulting declares bankruptcy for example...there is not more to squeeze from the stone.

But the businesses have...as you even pointed out...created business models so that they do not pay or lose profit share.

None of this has anything to do with fraud, we're talking about default. If you default on a loan, you end up paying many times over. From that point on, for years, you're going to pay a much, much, higher interest rate on everything. You can only default on an unsecured loan, and you can't default on student loans, so we're really only talking about credit card debt. For example, lets say somebody defaults on $5k they owe a credit card company, then they get a mortgage 5 years later. Their interest rate will be something like 5% higher because of that default. On a $200k home, that is an additional $10k per year (diminishing as the balance drops).

Even more commonly, when you go to buy a house 5 years later, they tell you they won't give you a loan because you have an outstanding default. You then go back to the first bank, they say that now you owe them $25k instead of $5k with the fines and interest and so on. You pay them that and then you still pay 5% more on your mortgage interest rate on top.

You always pay more than you got by defaulting. Banks don't rely on people being nice. They wouldn't give out loans if they hadn't got it figured out.

If somebody wants to scuttle their credit rating for a few quick bucks now, that's dumb. They're screwing themselves over. But I wouldn't call it "immoral" or anything so melodramatic. I'd put it in the same tier of things as, for example, failing to repair a leak in your roof despite the fact that a leak can pretty quickly do serious damage to your home value.
 
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Papa Bull said:
And where is it that "living wages can only be secured through loans"?

Many, perhaps most, families in the U.S. are in such a situation. The most common reason to run up debt is for car repairs, medical bills, home repairs, and so on. In at least some of those instances, such a case exists.

More generally, our money is generated by the creation of debt for which we, the people, are ultimately responsible.

Papa Bull said:
And what is the rest of that about "if money tracks resources and is distributed equitable" supposed to mean? What you said, as stated, isn't making sense.

Currency was originally made of stuff that was itself considered a resource which took effort to extract. The theory was that such currency would naturally track along with the production of other goods such that there would be just about exactly enough. The economy, and not a banker, generated money.

The means and rules by which money is distributed in a society are determined by people, and those means are not always equitable.
 
None of this has anything to do with fraud, we're talking about default. If you default on a loan, you end up paying many times over. From that point on, for years, you're going to pay a much, much, higher interest rate on everything. .

Fine. Loans. Byt we're not talking about how your crappy credit rating affects you for yrs to come.

We are talking about the business having a business model that spreads that default and loss of interest, etc across all other people that do business with that institution.
 
Fine. Loans. Byt we're not talking about how your crappy credit rating affects you for yrs to come.

We are talking about the business having a business model that spreads that default and loss of interest, etc across all other people that do business with that institution.

No, not quite. As I explained before, they only spread the cost to other people with similar credit scores. So, defaulters pay for the other defaulters and non-defaulters don't have to pay for defaults.
 
No, not quite. As I explained before, they only spread the cost to other people with similar credit scores. So, defaulters pay for the other defaulters and non-defaulters don't have to pay for defaults.

So then according to me, IMO...as per the OP's question...that is not moral behavior.

People can have bad credit scores for alot of reasons, including medical debt.

So. Another rationalization.
 
I agree, if we borrow money based on anyone's "good faith" then we have a moral obligation to repay the loan. But a loan in a commercial setting, such as a mortgage, isn't being made on good faith. It's a business contract, and that contract has collateral, mortgage insurance in some cases, remedies in the event of default, etc. I've just not heard any explanation why this contract is fundamentally different than any other.

I'm watching basketball - our coach is under a five year contract. He promises recruits he'll be their coach next year, and the next. etc. But if he gets a better offer, he'll leave, the next school will pay a large penalty for breaking that contract, and not one person will assert he has a moral obligation to harm his family's financial future and stay at the local university. Where is the principled difference between that and defaulting on a mortgage? Would any Fortune 500 company citing morality or ethical principle remain in a contract, repay a loan, if it's in the interests of shareholders to terminate the contract or default on a loan? Of course not.

Whenever we sign a contract promising to repay a loan, that is accepting a loan in good faith. It doesn't matter who is loaning the money.
 
for purposes of discussing the topic of this thread, the morality of financial repayment, the link should be obvious

You're bullchittin' us, aincha? The question statement you were responding to was:

If you think there is any correlation between a contract on your home and a cell phone contract, you aren't being serious in this discussion.

And you're trying to tell us that you worked in the financial sector but can't for the life of you figure out why a cell phone contract and a mortgage aren't comparable? Tell ya what. Since you don't know, I'll help you out. A mortgage is a SECURED LOAN. It is a FINANCIAL INSTRUMENT. A cell phone agreement is... well... a cell phone agreement. It isn't a loan. There's no interest. There's only a service contract for x-amount of time. And you can cancel whenever you wish and pay the balance of the contract plus penalty. But you're GOING to pay. It's not a mortgage. It's not a loan. And your phone isn't collateral. Any bills you decide you're just going to refuse to pay go typically into collections but all bills are not loans. If you have a mental challenge comprehending the differences there, then that would explain your challenges in this discussion - or as Tres Borrachos said, you may simply not be serious in this discussion.
 
No, not quite. As I explained before, they only spread the cost to other people with similar credit scores. So, defaulters pay for the other defaulters and non-defaulters don't have to pay for defaults.

These bankruptcies were the foundation of the financial crisis and subsequent "great recession". We ALL paid for these defaults.
 
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