Interestingly enough, the installment loan was originated in a very practical manner. I really like this overview of how credit really got started from The Industry Report:
Did you know that Arthur Morris is the man responsible for creating the installment loan in (or around) 1910?
It was called the Morris Plan (clever name huh) and it was the first stab at making credit available to the average person despite heavy criticism that lending money to working class citizens had failure written all over it.
And yet the American economy today is built on credit!
Back then, the lending requirements were as follows:
- You needed two co-signers in order to qualify
- The loan term was set to 1 year
- Payments were made in weekly and monthly installments
Boy how things have changed since then.
Things have indeed changed since then. Now credit is obscenely easy to come by (think: credit cards), and the aim of most creditors (again, think: credit cards) is to keep you in debt so that they can make money off of you by charging interest.