The loan interest rate has a lot of risk. It is the risk in burdened by interest bearing asset. It is most common on a loan or bond, which the debtors will pay on certain duration of time. For example if apply a loan, it has always an interest. The computation of the interest depends on the amount of money you borrowed. If you borrow a larger amount then the lending stores will usually give you a high interest rate. The high interest rate is imposed on them for the reason that bigger amount has greater risk from the creditors. It is one way of protecting the money the let borrowers borrowed from them from non-payment.
The non-payment of debt of borrowers can be the cause of the foreclosure of a lending business. Since money is the bottom line of lending business, if their debtors will not pay, they can continue their business because they have no money left to offer to some borrowers who are willing to pay. That is why they have lots of strategies in order to be paid by their customers. One of which is collateral, by getting their atm cards or other documents that they can demand payment from borrowers.