The loanable funds theory states that there is an inverse relationship between the interest rate and the demand for loanable funds. The lower the interest rates are, the more likely people are to borrow funds, which means that the demand increases and the demand curve shifts outward. When the rate increase, the demand for loanable funds decreases, which would cause the demand curve to shift inward.
However, there is a direct relationship between the interest rate and the supply of loanable funds. When the rate increases, the quantity of supplied funds increases as well. However when the rate decreases, the quantity of supplied funds decreases as well.