Well the biggest burden is the scams. I mean there are tons of scammers on those platforms, and there is no way to collect the debt, internationally.
Bitcoin is not recognized in most countries, so the legal way is out of question.
That is why interest is high, to factor in the risk. If governments would legalize bitcoin, the interest would go lower.
Yes, there are lots of scammers registering accounts on the BTC peer-to-peer-lending sites, one has to assume most of the profiles are scammers and never invest into anyone unless one already knows them or knows someone that can vouch for them, or they have some reputation from other sites.
ID verification is worthless, it almost seems like the scammers loves ID verification - either because they can game the system and send forged or stolen ID document scans or because they just don't care that their real name gets recorded with the loan.
Not just that but Bitcoin is not good for lending ,because it's a deflationary currency. You take a loan of 500$ in 1 BTC, the BTC shoots up to 1 million $, and you now owe 1 million $.
No way to repay this, people who borrowed before 2013 have all defaulted, and there is no way to collect the capital back, because they are international people.
Bitcoin price can go both up and down, I believe it will be fairly steady for a while now that we have the halving behind us and without capacity increases in the network. But yes, BTC price volatility ultimately hurts lenders. If one believes the BTC price will go to the moon anytime soon, then it's IMHO just a bit too greedy to expect interest in addition to the growth of value.
If you keep your business bitcoin related then the funds you earn in btc will increase with the value, the problem arises when someone burrows btc turns it into a centralized currency. The $ for example never has unexpected falls or rises. Nothing huge anyways where as bitcoins can. Do business in bitcoins and the money you earn rises with the value of btc.
For short term loans this is usually not a big issue. I think one of the best use-cases are local bitcoin trading (i.e. selling and buying bitcoins on localbitcoins) - sometimes someone wants to buy 5 BTC and the seller has only 3 BTC available - borrowing 2 BTC for a day or two is a nice option, especially if the trader knows it will be easy to convert the fiat into bitcoins again.