Credit Risk

Credit risk is the possibility that a borrower will fail to repay a loan or meet their financial obligations, leading to potential losses for the lender. This risk is assessed based on the borrower’s creditworthiness, including their credit history, income stability, and debt levels. Evaluating the credit risk of a borrower is crucial for determining loan terms, setting interest rates, and minimizing potential losses. 

Effective credit risk management involves analyzing borrower data and using risk assessment tools to make informed lending decisions and protect financial interests.