Really? I'm not a huge mortgage and loan company lover, but you guys have no moral compunction to pay what you agreed to?
Apparently standing by your word doesn't mean the same thing to all people. :|
If this was a moral issue, people would only borrow money when they really needed it, people who lent money would rely on someone's word that they would repay the money, and honest lenders and borrowers would work together to pay loans off.
But that's not how it works in real life. The lenders don't lend money just because a borrower needs it -- they only lend when it makes business sense for them to do so. And they demand repayment regardless of the borrower's circumstances. And borrowers borrow money on a whim, and don't limit their borrowing to what they need. So neither side is acting "morally" -- this is just a business transaction, and both sides will determine what the "right" course of action is based on business, not moral, principles.
That doesn't mean if you don't pay a loan off you don't suffer consequences. But is does mean that weighing the cost of those consequences against the cost of abiding by the contract is not unreasonable, and it doesn't make a person a "bad" or "immoral" person if they choose the best course of action for them -- even if it means not paying the loan off, and suffering the consequences that flow therefrom. It's just business. Like I said in an earlier post, if you do fail to pay a loan, you may end up paying
more in the long run, so it's almost always a bad idea from a financial perspective to fail to pay off a loan. But there may be circumstances where one is financially better off not paying a loan, and if that's the case, it's not an immoral act to decide to make that decision.
Look at it another way -- if you really, really need a loan -- say for a kidney transplant or something, not for a new SUV -- but your credit sucks, or you are unemployed, the bank is not going to loan you the money, no matter how badly you need it, because they don't think they are going to get paid back. Does that make the bank immoral? If not, why only enforce morality on one side of the contract? If you take out a loan, but through no fault of your own (layoff, whatever) end up falling behind in the payments, is the bank being immoral if they raise your interest rate, or foreclose on the loan?
That's why I think this is just business, and morality doesn't play a role.
All that said -- I think it is an entirely different animal when you are talking about a loan from a friend, or family member, or organization that lends based on need. In that case, they are lending to you and are counting on your word that you will repay the loan. In that case, I think moral issues and "your word" DO come into play -- it's more like the situation in my first paragraph.
Maybe this is splitting hairs, but I see a real difference between loans made between parties based on business decisions, and loans made between parties based on the relationship between the parties. One is just business, the other does have a moral bent to it.
BTW, this is the reason why punitive damages are not available in breach-of-contract actions. The law doesn't care why someone breaches a contract, only that they do. And if they do, they have to reimburse the other side for the damages they suffer due to the breach -- but no more than that. The law recognizes a contract as solely a business decision, and doesn't have a punishment aspect for breaches of contracts.
BTW, I do pay all of my bills on time!
I had to learn the hard way too.) Sit her down and TALK to her, because being trapped financially is tough. She can certainly go the bankruptcy route but there are serious long term ramifications. If she's unable to make a car payment she's not budgeting correctly and very likely shouldn't have gotten it in the first place. I'm going to go out on a limb again, but she probably has a substantial sum of credit card debt as well. If she gets some credit counseling she can lower the interest rates on her cards and make her car payment. I'm sure she would not be the first person to contact the auto loan company and explain how she's in over her head. Credit counselors can help her, my advice is to get her to see one.
