If the borrower defaults, the potential loss for the lender will be larger than 1 / 13  BIS central bankers' speeches  in the case of a P&I loan given that interest-only loans by design allow borrowers to maintain the debt at a higher level over the term of the loan.
That’s why, when providing interest-only loans, prudent lenders will carefully assess the borrower’s ability to make both interest and principal payments.