Not quite sure what you are asking about in this first part of your comment, but I'll get back to that.
Firstly though, I think I might see what you are getting at, but correct me if I am misunderstanding what you are saying.
> It's something I would want to avoid. (A VPS is a prime candidate to be compromised)
So, I think that what you are saying here is that by passing all of your traffic through a VPS that you set up yourself, you are increasing the attack surface that others have against you in a specific and potentially particularly dangerous way.
And to some extent I agree with that.
Unlike what the first one of the other commenters said in their response to you, I think you are not talking about state level actors. I also think that you are not talking about the VPS provider wanting to look at your traffic. I think what you are pointing out is that:
1. Keeping the operating system and services that are running on the VPS up to date with patches will be the responsibility of the person that is renting the VPS.
2. The VPS is more or less permanently connected directly to the public Internet. As such, it is under constant "fire" from automated attacks. (Anyone who has run a VPS or other server or device directly connected to the public Internet knows this to be true. It doesn't matter how big or small you are, or who you are.)
3. As a consequence of points 1 and 2, failure to keep the OS and services patched could result in compromise of your VPS. (Most likely the purpose of the compromise is that the attackers want to use the machine for things like having it participate in DDoS attacks, sending spam, compromising other actually valuable targets, or mining crypto currency. But it can indeed not be ruled out that they would potentially listen in on the traffic you are passing through your VPN on it also. And even if most of the criminals don't care about the VPNs running on the compromised servers today, they might in the future. Especially if there is a common wide-spread VPN configuration that a lot of the compromised servers are all running, so that they could mass-intercept all of the data on all of those compromised servers with little work/effort on their part.)
If that is what you mean then I agree that it might be a problem.
Compared to professional VPN providers, any individual renting a VPS is probably comparatively less skilled at keeping their VPS secure than the VPN provider is at keeping the VPN service secure from external attackers. And even if someone has all of the skill that they need to securely configuring their VPS and keeping it up to date with patches, they still have far less time on their hand available for auditing, monitoring, and all of that, than all of the people that are being paid to take care of those things at a large scale VPN provider with many employees.
So again, that's another point that I agree with you about if that is also what you mean.
At the same time, however, it should also be pointed out that it can be really hard to know who the people behind any particular VPN service provider is. But the same argument applies against a lot of the VPS providers out there.
Any random VPN service provider could claim that they have a big team, that the service they are offering is secure, and that they don't keep logs and don't record traffic. But at the end of the day for most of them, you have nothing more than their word to go on.
The same applies to random VPS providers though. With most of them you have no idea about who they are and what they are actually spending their time doing.
Sorry my comment is getting real long and yet there is more that I would like to touch on.
For example, another point in favour of the argument that I think you are making is that potentially, VPN service providers are monitoring their whole networks of hosts specifically for attacks that seek to intercept the traffic of their customers, in addition to the regular type of attacks that all hosts on the internet are subject to.
Whereas with a VPS provider, I imagine that they are primarily monitoring for the regular type of attacks mentioned before. VPS providers will notice, and shutdown VPSes that have been compromised if those compromised machines are participating in DDoS attacks on other hosts, sending spam, or burning too many CPU cycles as a result of cryptocurrency mining malware having infected them. But unless notified by one of their customer about the specific type of attack where data is being exfiltrated or tampered with on an infected VPS itself, most VPS providers would be unlikely to notice such a type of attack I think, and furthermore I think this is natural to expect. After all, when you rent a VPS, you are specifically paying the company for the privilege of you being in charge of what that VPS is doing, and for them to largely stay out of and away from your VPS itself, no? At least, that's the way that I think about it. As long as the VPSes are not consuming excessive amounts of resources and not being disruptive or malicious towards external hosts, I think both the VPS companies and their customers expect the VPS company to not interfere with what the VPS itself is doing, and to not be surveilling the processes, disk and memory of the VPSes. It's a virtual private server after all, right?
So that's another point for the argument I think you are trying to make.
But I don't see VPN service providers as being much safer as a whole. I think it is highly probable that among all of the companies that provide VPN services, it is likely that a significant portion of them are straight up malicious. By that I mean, they say they don't look at your traffic and they say they don't keep logs. But for all we know, and given the fact that many forms of cyber crime is profitable enough that criminals are engaging in it, I think it is reasonable to suspect that quite a few of the providers are mining your data or worse.
This brings me back to the first part of your comment, which has me confused about what you mean.
> Does the VPS have unencrypted access to the VPN?
Confused because yes, this is how any VPN works. You get an encrypted link between your device and the other end of the VPN connection. The VPN connection extends only to the VPN server/gateway that you connected to in the first place, no matter if that is some VPN server you are running on a VPS yourself, or if you are paying a VPN service provider for it.
The extent to which your data is encrypted or not all the way to the final destination will be entirely dependent on what kinds of traffic your device itself is sending in the first place.
If your device is tunneling unencrypted traffic inside of the VPN connection, then unencrypted traffic will be what comes out at the other end where the VPN tunnel is terminated. There is no way around that. The only thing you can do, is to ensure that your device does not try to send that kind of data through the VPN in the first place, if you are concerned about said traffic being visible at the other end of the VPN tunnel.