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Why do people pay interest

Why do people pay interest - ?...

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Why do people pay interest? Lenders demand that borrowers pay interest for several  important reasons. First, when people lend money, they can no longer use this money to  fund their own purchases. The payment of interest makes up for this inconvenience.  Second, a borrower may default on the loan. In this case, the borrower fails to pay back  the loan and the lender loses the money, less whatever can be recovered from the  borrower. Interest helps to make the risk of default worth taking. In general, the more  risk there is of default on the loan, the higher the interest rate demanded by the lender.  Finally, and most importantly, lenders demand interest since while the borrower has the  money, inflation tends to reduce the real value, or purchasing power, of the loan. In this 
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