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1. #Business finance term productive vs unproductive moneymoney how to
2. #Business finance term productive vs unproductive moneymoney verification

But because they generally sold the mortgages on to institutional investors and recouped their money quickly, they had little incentive to exercise care for borrowers’ long-term interests. Lenders were aware that repayment would depend on housing prices continuing to appreciate from their already rapidly-growing levels. Lenders may also mis-gauge the suitability of a loan, or they may be greedy, unscrupulous, or short-sighted.įor example, the global financial crisis of 2008 began with defaults on mortgages that were based more on speculation-by both borrowers and lenders-than on good housing opportunities. Borrowers may lack the knowledge to gauge the suitability of loans, or they may simply be short-sighted or impulsive. In practice, this can be quite difficult to accomplish. Lenders are obligated to assist borrowers in this task and to decline to lend in unsuitable circumstances. Borrowers are obligated to limit themselves to loans that will make them productive and that they can be reasonably expected to repay. These examples reinforce the biblical view that finance is a shared obligation of borrower and lender. A business loan made without due diligence may be squandered on unproductive assets. A car lease with teaser rates or a back-end balloon payment of more than the car is worth may encourage the borrower to buy a car he or she can’t afford.

#Business finance term productive vs unproductive moneymoney verification

On the other hand, a mortgage made on speculative property or without income verification or without sufficient equity may damage both the borrower and lender. A business loan may be used to finance equipment, inventory, receivables or other assets for growth.

A car lease may make it possible for the borrower to get to work efficiently. A mortgage may increase the borrower’s productivity by reducing housing costs. So borrowers and lenders both have a responsibility for the use of borrowed money. There is only something to share if the loan makes increased productivity possible. God’s intent is that finance be a form of sharing, over time, among borrowers and lenders.

#Business finance term productive vs unproductive moneymoney how to

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