Not quite. You make the mistake of adding significance to individual each loan. The reality is a lender might loan to 100,000 people and they know some of those

Not quite. You make the mistake of adding significance to individual each loan. The reality is a lender might loan to 100,000 people and they know some of those loans are going to fail. If they had a process to only lend to people who would never default, well, impossible. The interest rates you're being charged aren't tailored specifically to you. But they look at everyone else with similar income and credit and look a the default rate and figure out what they need to charge to make a profit. It's the sum of the whole lending business, not individual loans, that matter. They'll do as much as they can to mitigate the loss on loans that do default. It's just throwing money away not to. But they've got it all figured out to loan money, have some of it default, and still make plenty of profit. The idea that the minority of people who do default and declare bankruptcy causes them any pain is really quaint and naive. But boy is that an image their PR would love to get everyone to buy into. If you can convince people to feel bad. If you can convince society as a whole to shame and pressure people into doing something that's the most advantageous for lenders, that is just a lending vision of utopia. (Disclaimer: I've never been in serious debt or declared bankruptcy. There's no morality that should be implied or assumed by that.)