Creditworthiness Loans and finances

Creditworthiness Loans and finances

Creditworthiness

Creditworthiness

From the definition of creditworthiness, it appears that it is the ability to repay the loan taken together with interest in the agreed repayment schedule specified in the loan agreement. In other words, it is the appropriate level of income the borrower receives and the maximum loan repayment installment. Banks in assessing creditworthiness also take into account the stability of the professional situation of the person applying for a loan. The calculation method is in most cases the same.

The fixed costs are deducted from the income earned by the borrower. They include repayments of previously incurred liabilities and fees related to running a household. The next step is to divide the remaining amount into the number of people dependent on the borrower. After deducting all costs, the value of the future loan installment remains. Due to the fact that the borrowed money comes from deposits made by customers, the bank makes a risk when granting credit. It is impossible to be absolutely sure whether the borrower will meet his repayment in a timely manner.

It is also difficult to predict circumstances that may interfere with this. Therefore, the assessment of creditworthiness allows you to assess the degree of risk associated with a specific loan agreement not only at the time of signing, but also throughout its duration. Banking law specifies in detail what criteria should be followed by banks in assessing creditworthiness. One of them is the customer having a credit card. Credit cards definitely reduce the ability to make another commitment. Credit analysts try to avoid a situation where a customer using several credit cards falls into a spiral of debt that he will not be able to repay.

Apart from examining the financial condition of a potential borrower, banks also take into account such factors as age, education, marital status and also the professional profile. All this information will help minimize the risk that the bank must take. Therefore, before making a decision about making a commitment, it is worth carrying out your own, reliable credit rating. It is worth considering any changes at the earnings level in this assessment. This will avoid many disappointments, nerves and, above all, save time.

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