Debtors aren't just divided into "can pay" and "can't pay", there's a huge category in there of "can meet the minimum payment required to avoid default (and pot

Debtors aren't just divided into "can pay" and "can't pay", there's a huge category in there of "can meet the minimum payment required to avoid default (and potential legal problems) for a very long time". There's other categories, but high interest debt (e.g payday loans) is targeted at that one: it locks them into a situation where they will nearly perpetually have to pay a small amount to the debt issuer, while their total debt rises. The high rate is there to increase the probability that the debt will "lock on", even for small sums. This way, even if they manage to land a windfall someday, it often won't pay back the full interest owed, so they remain in debt and, crucially, making regular small payments upon which the debt issuer relies -- it's basically a SaaS model. In this way, a person who just needed $200 once can end up paying $2500 over a multi-year period before somehow escaping or defaulting -- and that's why the bank does it, to maximize return. The person who borrows $1000 but can only get back $800 ever is rare -- the person who can only get $1000 back over the course of 16 weekly payments of ~$60, and can somehow then go on to keep paying $60/week for another full year, is common.