Lenders generally want borrowers to agree to invest prudently,yet once a loan is made borrowers may use the money in a highly risky fashion.This leads to the problem of

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The problem described in the question is that of moral hazard. Moral hazard refers to the tendency of a party to take more risks because the costs of those risks will be borne by another party. In this case, borrowers may take on higher-risk investments because they are not responsible for repaying the loan if those investments fail. Lenders may mitigate this risk by setting conditions or covenants on the use of the loan funds, but there is always some risk of moral hazard when lending money.

Lenders Generally Want Borrowers to Agree to Invest Prudently,yet Once