Expensive in this case (for the US) meaning $700 to $2000. Which is rather a lot for the insolvent. Not to mention the paperwork sounds like an ordeal.
I think there is a psychological block for a lot of people too. It takes a certain point-of-view and education to be able to enter into lending arrangements with creditors with the perspective: "I believe I am going to make a profit and we will both win. But there is a chance I will not be able to. The lender is self-consciously taking a risk, which they are being compensated for via interest (same basic principle with an investor). If things go badly and I need to declare bankruptcy, then well, yes, it sucks. But I have done nothing morally wrong."
Fun fact: Henry Ford, Abraham Lincoln, and Walt Disney declared bankruptcy.
Interest compensation for risk is distributed, granted. X percent of creditors will default on their loans. You don't know ahead of time who will and who won't. So demand Y percent from everyone over and above what you would in a world where everyone paid.
If that's not what you are getting at, I don't get your comment? Unless we are talking of a foolish lender?
Edit: Durr. Just got it. You are talking about the return the lender receives, the reason he lends instead of consumes. Yes, part of interest is risk compensation.
