Credit Granting Decisions

Steven Finlay

Chapter 7 in Consumer Credit Fundamentals, 2009, pp 138-165 from Palgrave Macmillan

Abstract: Abstract In an ideal world, every borrower would repay their debts on time and lenders would earn a living from the interest and other income earned over the lifetime of the relationship. In the real world however, there is an inherent risk that a borrower will not repay the credit advanced to them. This could be for any one of a number of reasons, ranging from poor financial management or loss of employment, to family breakdown or death. A credit business will only be profitable if the return from those that repay their debts exceeds the losses where default has occurred. Therefore, when someone applies for credit, a lender needs to be able evaluate their creditworthiness, and only lend to them if there is a good chance that they will repay the loan.

Keywords: Interest Rate; Credit Card; Credit Risk; Customer Behaviour; Consumer Credit (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-23279-2_7

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DOI: 10.1057/9780230232792_7

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