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

Banks charge higher interest rates to individuals perceived as higher-risk borrowers to compensate for the increased likelihood of default. This risk assessment is based on factors like credit history, income stability, and debt-to-income ratiOS. By charging more, banks aim to protect their potential losses while maintaining profitability. Higher rates also serve as an incentive for borrowers to improve their creditworthiness over time.