It doesn't. But plenty of loans go unpaid despite what the terms say--that's why they're risky, and why they're profitable. The system allegedly works because

It doesn't. But plenty of loans go unpaid despite what the terms say--that's why they're risky, and why they're profitable. The system allegedly works because we have a choice about whether the creditor profits. And we'd be better off if that choice were more effective at keeping creditors accountable for the outcomes of the loans they grant, not merely their profitability, but for that to work the whose-loan-is-this question needs to have a simple answer.