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What factors do you base on or consider designing a proper credit policy for a financial institution?
Wiki User
∙ 8y ago
The factors that one should consider in designing a proper credit policy for a financial institution are character, capacity, capital, collateral and conditions. The first factor is character, which refers to a borrower's reputation. Capacity measures a borrower's ability to repay a loan by comparing income against recurring debts. The lender will consider any capital the borrower puts toward a potential investment, because a large contribution by the borrower will lessen the chance of default. Collateral, such as property or large assets, helps to secure the loan. Finally, the conditions of the loan, such as the interest rate and amount of principal, will influence the lender's desire to finance the borrower.
Wiki User
∙ 8y ago
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