Ask HN: How are good borrowers rewarded in your country?

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Lenders make money from the good repaying behaviour of good borrowers. However, lenders are known to restructure loans with bad borrowers to recover pending amount. This is a moral hazard signalling the good ones that they aren’t doing any good by repaying on time. Good repayment behaviour has helped lenders, what about the borrowers?

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There is First Republic Bank that rewards edu loan repayments. If you close it early then it rewards you with cash as a percentage of interest that were yet to be paid. It believes that it will earn more from the customer in its lifetime.

e.g. if you repay a 10 year loan in 4 years. You will be rewarded with cash as a percentage of interest that were yet to be paid in next 6 years.

I'm assuming this is in relation to individuals that borrow (not businesses). In the US, consistently, good repayment behavior generally leads to higher credit rating, which in turn makes it easier to get mortgages, car loans, credit cards, etc at lower interest rates and/or lower deposit requirements. Bad behavior leads to the opposite.

In the US, the moral hazard is offset because there is a high reward for good repayment behavior and a major risk for bad repayment behavior. For example, the restructuring for bad behavior usually comes with other problems such as being blacklisted by creditors and/or banks, or not being able to get a nice job (some jobs in the US require good credit rating).

Is it true that credit behaviour is better in economies where ratings strictly affect non-banking aspects of life?

I have no idea. Anybody know or can point to a study that tried to analyze this?

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