The fixed cost of loan origination and servicing explains why finance companies prefer small shorter-term loans over large longer-term loans.

Question

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Finance companies often prefer larger, longer-term loans because the fixed costs of loan origination and servicing are spread out over a larger amount and a longer period, making these loans more profitable in the long run compared to small, shorter-term loans.

The Fixed Cost of Loan Origination and Servicing Explains Why