Eli5 ‘How do personal loan companies make money if you pay everything you loaned back,before the first installment date (and no early repayment fee either)?’

Question

Eli5 ‘How do personal loan companies make money if you pay everything you loaned back,before the first installment date (and no early repayment fee either)?’

In: 6

Answer 1

If someone pay’s it back with no interest and no fee, then the company doesn’t make money from that specific transaction.

But almost all people in the situation where they need to use a personal loan company, aren’t the kind that can pay the loan back in time.

So sure they might actually lose money on 0.01% of customers, but they make a boatload from 99.9% of their customers that covers any losses.