Fiscal prudence.

Roll on Monday...! xxx

You’re a bank, and you’re about to lend me fifteen thousand pounds to buy myself a brand spanking new motorcar. Which is jolly nice of you.

So what is the one single most important thing you’re going to want to know?

I mean, there are lots of things that are important. You’re going to want to know where I live. How long I’ve lived there. Whether I’ve got a good history of paying my bills and debts. Whether I’ve got a job and how long I’ve had it. All of these things are clearly very relevant.

But what is the one single over-riding concern?

To my mind it’s simple. And it is, can I afford to pay you back? That there is the one fundamental crux that the whole process of lending me a large sum of money that I’m going to pay you back over several years rests on. Without that basic ability to pay then however good my credit rating, however reliable and upstanding I am, I’m simply not able to fulfil my obligation to you.

So if I have a sudden rush of blood to the head and decide I’m going to splash out £15K on a brand new Ford Focus and you’re going to fund it for me the one single most important question has to be how much do I earn, and how much are my normal monthly outgoings? Once you know the answer to those two questions you’ll have a pretty good idea of my physical ability to service my loan to you.

Agreed?

So bearing that in mind, you can imagine how surprised I was whilst proposing a customer for finance (a proposal that was instantly approved and accepted on line with no human intervention by the finance company) to discover that there is absolutely no enquiry into income, and absolutely no enquiry into outgoings.

Technically speaking, if you’re a shelf stacker in Sainsburys (as I nearly was, had there been any jobs going) with your meagre income just about keeping your financial head above water, but you have an excellent credit rating (not hard to achieve) you can walk into a showroom and order a brand new twenty five thousand pound BMW, whack it onto finance and drive off a few days later in your shiny new car.

You won’t be able to afford to pay for it of course, but there’s nothing to stop you doing it should you wish.

And this is the brave new world of prudent responsible finance institutions dedicated to thwarting the years of excess lending that led to the financial meltdown that ended us in the mess we’re currently in.

Good eh?

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