Author Topic: Mustachian lending program  (Read 1541 times)

Mark

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Mustachian lending program
« on: May 25, 2013, 01:58:57 PM »
I wanted to pose an idea to the Mustache community that was inspired by MMMís Lending Club experiment and many posts by new Mustachians. The basic idea is to provide lending to new Mustachians who are still in debt from their pre-Mustachian days but clearly demonstrate sustained, responsible (by MMM standards) spending habits.

I see many posts on these forums and on reddit about people who have recently changed from their wasteful spending habits to saving large percentages of their income. Unfortunately, they have created a large debt-mountain for themselves to climb, sometimes with large interest rates. Thereís lots of good advice but in general, it is often a somewhat long and tough road to financial stability.

The idea is to provide low interest rate debt consolidation (possibly P2P) in a loan process that is much more strict than conventional bank loans and measures a personís financial situation on Mustachian terms. Rather than just looking at a personís credit history and income and then assigning an interest rate, they would enter into a long-term (as much as a year) financial program to change their spending habits and increase their savings rates. New Mustachians may find this easy to qualify and just go through the waiting period but it could create a program to encourage non-Mustachians to change their ways and give them a clear set of instructions on how to do it. The program would track spending and could possibly even have the potential borrower keep a log of the life changes they are making. After showing that they have made substantial and long term improvements, they would be able to get a lower interest rate loan to consolidate their debts, further helping to speed the process to get out of debt.

This obviously helps the borrowers both by instilling good spending habits and speeding up the process of getting out of debt. It would also help lenders by creating lower risk borrowers where there were not any before, and it would help society as a whole by eliminating wastefulness and helping lots of people.

  • What would the program need to work?
  • What would you as a lender need to be able to trust borrowers?
  • How much privacy would you be willing to give up and work would you be willing to do to take advantage of such a program?
  • What things could be put in place to prevent people from making temporary changes just to ďcheatĒ the system?
« Last Edit: May 25, 2013, 03:53:39 PM by Mark »

Khan

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Re: Mustachian lending program
« Reply #1 on: May 25, 2013, 02:58:09 PM »
I quite simply wouldn't participate in such a system, I'm wary enough of adding the LendingClub(not lending tree) tax issues(and I don't want to risk a solid 10k there to make it worth the time just yet), and I'm simply not a fan of risking my money on unknowns. In my personal life, I have lent out 5.5k to a friend, and he's making mustachian changes and has paid back 2k of it so far, but I'm willing to lose that money, and I've had face to face conversations with him and I understand where he is mentally, and what his exact situation is. The same cannot be said of people on here, for me at least.