In the Pali Canon, Buddha talks of developing skill. Therefore a Western Buddhist develops skills. It is surprising how ignorant and emotional people are when any conversation about money arises. From the arising of skill comes the arising of knowledge. From the stopping of ignorance comes the stopping of clumsy action! Bank loans can be an emotionally challenging experience. Banks make money when you take their money. This means most likely they want you to take out a loan as much as you want to spend the money. They really don’t care about what you spend the money on unless the sum to be borrowed is considerable. Then they will want security…
We forget about the interest the banks attach to their offering. This is where the Western Buddhist applies some skill. Others think only thinking of getting the loan and how to spend it, a Western Buddhist is calculating the interest and shopping around for a better deal, and even negotiating interest rates. Emotion retards our vision of what will happen in the future. With the illusion of compound interest most Banks set-up the Borrower to payback approximately 50% of the principle as interest. An example of this; a $20,000.00 loan creates $10,000.oo interest which means you pay $30,000.oo in total.
Does knowing this fact make people think twice about taking the banks money, unfortunately no. Emotion controls most peoples desire to spend money on stuff. They will happily sign a pieces of paper contracting them to pay the bank $10,000.oo for doing almost nothing. Fractional reserve lending means a bank only has to have a fraction of the money it loans out. Some Banks operate at a ratio of 40 to 1. Using the $20,000.oo example; 1/40th of the principle amount is $500. So the bank only needs $500 to legally collect a $10,000.oo interest payment from you. Surprisingly your bank is handing you borrowed money from a larger Bank or Central Bank, with the expectation you will them $10,000.oo interest for what I am not sure. Either way if you borrow $20,000.oo you’ll payback $30,000, and the bank only need $500 to collect $10,000 from you as an interest payment.
Buddha realized developing skill would diminish ignorance. He called this “right thought” which is a component of the Noble Eight Fold Path. Skill demands to get a bank loan you must develop knowledge of fractional reserve lending and how it works. “Right Thought” & “Right Action” are skill dependent. Bank loans are created from credit released from a Central Bank. How does the Bank create this credit. As a Western Buddhist if considering Borrowing some of the Bank’s Credit; it is your duty to increase your skill in this arena. Ignorance is not a defense with Buddhism or a court of law.