The possibility that a borrower might engage in riskier behavior after a loan is made is called

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Moral hazard refers to the possibility that a borrower may take on riskier behavior once they have received a loan, as they may feel less incentivized to prioritize safe and responsible financial practices. This can increase the likelihood of default or financial losses for the lender. Adverse selection refers to the possibility that high-risk borrowers may be more likely to apply for loans, while liability aversion is a term used to describe a company's tendency to avoid engaging in risky behaviors altogether. The risk of default, while related, is not as accurate a description of the specific behavior that moral hazard refers to.

The Possibility That a Borrower Might Engage in Riskier Behavior