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Why lender has to study the performance of the potential borrower?
Wiki User
∙ 14y ago
A lender has to ensure that the borrower has the means to be able to pay back the debt from taking the loan. Credit ratings, as they are commonly called, are a scoring system used to determine a persons (company or country) ability to repay the debt. In addition, a lender has its own set of scoring an individuals worthiness. The creditors commonly look at a persons assets, liabilities, debts and history. As a side note, it is very important for a ceditors to assess the riskiness of lending to a person. A main cause of the recent financial crisis and US housing bubble is ceditors giving almost 100% loans to people who do not have the means to pay back the debt.
Wiki User
∙ 14y ago
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