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Credit Granting Decisions

In: Consumer Credit Fundamentals

Author

Listed:
  • Steven Finlay

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.

Suggested Citation

  • Steven Finlay, 2009. "Credit Granting Decisions," Palgrave Macmillan Books, in: Consumer Credit Fundamentals, edition 0, chapter 7, pages 138-165, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-23279-2_7
    DOI: 10.1057/9780230232792_7
    as

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