Robert Frost
“A bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain.”
Consumer credit is simply the lending of money to people, typically in mass-market, structured forms. Think mortgages, car loans, personal loans, and credit cards.
In theory, the process is a simple one: secure a large chunk of capital at a good rate; divide it into more-useful smaller parcels; then market those parcels at a rate that attracts ample borrowers; but the right kind of borrowers, you want enough of them repaying their debts to cover those that don’t, with a sufficient margin left to pay the operational costs and a little bonus for yourself.
In practice, it is a little trickier than that.
Even if we leave the funding to the suits in treasury, we’re still left balancing loan size, loan price, and loan risk in a market full of competition. Is it easier if you have some collateral? Yes and no. High-quality collateral can limit your risk, but it can add to your cost and competition. That’s what this show is about, listening to how lending professionals around the world are making compromises and finding gaps.
You can listen to new episodes every Thursday on your podcast platform of choice, or try out one of the featured episodes below.
