Why might banks charge higher interest rates to someone who they thought might not pay their loans?

Select the best answer from the choices provided.

Banks typically penalize people who have not used their money wisely to encourage better financial skills. Higher interest rates are one of those penalties.

People who might not pay back their loans are a greater risk to the bank. The higher rates compensate the bank for the risk they take.

The federal government sets the interest rates banks must charge based on different risk factors. Banks are following the law when charging high interest rates.

Banks want to discourage people with poor spending habits from borrowing money. Banks do this by charging higher interest rates.

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29 December, 09:27

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Frances Frazier · Answer 1

B. People who might not pay back their loans are a greater risk to the bank. The higher rates compensate the bank for the risk they take.