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I needed money so I went to the bank and asked:
-I need 1000. Whats you prime rate for a year?
--At our prime rate, you will pay 100 each month for a year.
-Cool. Lets do it.
--Wait! You dont qualify for our prime rate. You default risk is average, not below average. So, you need to pay 200 each month.
-Let me see if I understand your logic: I have less money so you charge me more.
--No, no, no, the reason is the risk. You have a higher default risk, so we have to charge you more.... Thats it
.
-Hmmmm... So after 6 months I have fully paid you the 1200 you charge at your prime rate for a full year. I can live with that. I will pay you back in 6 months.
--No, no, you must pay a full year, 2400 total.
-What??! After 6 months I paid you all the money plus interest, more than the prime rate. What default risk are you talking about? I already paid you all the capital plus interest.
--Thats the way we do business!
Mr. Spock came to help me:
->Thats not logical.
The man from the bank replied:
--This is banking!
And I woke up!
-I need 1000. Whats you prime rate for a year?
--At our prime rate, you will pay 100 each month for a year.
-Cool. Lets do it.
--Wait! You dont qualify for our prime rate. You default risk is average, not below average. So, you need to pay 200 each month.
-Let me see if I understand your logic: I have less money so you charge me more.
--No, no, no, the reason is the risk. You have a higher default risk, so we have to charge you more.... Thats it
.-Hmmmm... So after 6 months I have fully paid you the 1200 you charge at your prime rate for a full year. I can live with that. I will pay you back in 6 months.
--No, no, you must pay a full year, 2400 total.
-What??! After 6 months I paid you all the money plus interest, more than the prime rate. What default risk are you talking about? I already paid you all the capital plus interest.
--Thats the way we do business!
Mr. Spock came to help me:
->Thats not logical.
The man from the bank replied:
--This is banking!
And I woke up!
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