Essence of credit risk and assessment of customers’ creditworthiness when paying off a car loan

Elvira A. Rusetskaya, Yana A. Kirileva and Ivan D. Shvarts
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Elvira A. Rusetskaya: North Caucasus Federal University
Yana A. Kirileva: North Caucasus Federal University
Ivan D. Shvarts: North Caucasus Federal University

Economic Consultant, 2023, vol. 4, issue 4, 43-54

Abstract: Introduction. The topic is relevant because, with the increasing demand for cars and the growth of car loans in recent years, banks and financial institutions need a more thorough assessment of customers’ creditworthiness. In the highly competitive auto loan market, banks strive to improve their creditworthiness assessment methods to offer more favorable terms to customers. This creates the need for continuous improvement of approaches to credit risk assessment. Modern technologies such as big data, machine learning, and artificial intelligence are opening up new opportunities for more accurate assessment of customer creditworthiness. The article aims to consider the essence of credit risk and develop proposals for minimizing it in car loans. Materials and methods. The materials were researched in finance, banking, and credit risk and published in peer-reviewed scientific journals. The research methods were literature analysis and comparative analysis. Results. Car loans are a common type of consumer credit and have fundamental distinguishing features of other kinds of loans. They are also an example of a complex interaction between a bank, a car dealership, a customer, and insurance companies. The statistics on the frequency of causes of non-repayment of consumer loans among individuals are analyzed. Measures to reduce the likelihood of non-repayment of car loans are proposed, and the possible positive and negative consequences of introducing these measures are considered. Conclusion. With the development of technologies such as artificial intelligence, machine learning, and big data, new opportunities are opening up for more accurate and practical assessment of customer creditworthiness. This allows us to develop more complex models that can consider numerous factors and accurately predict the probability of default. Research related to assessing customers’ creditworthiness when paying off car loans can help improve credit risk management methods, increase the financial stability of banks, and improve consumer protection.

Keywords: car loans; credit risk; risk minimization; secure lending model (search for similar items in EconPapers)
JEL-codes: C58 D18 P46 (search for similar items in EconPapers)
Date: 2023
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