What is loan grading?

Question

Accepted Answer

Loan grading is a process of evaluating the creditworthiness of a borrower and assigning a risk rating to the loan.

Loan grading helps lenders to assess the risk associated with a loan and make informed decisions.
It involves analyzing various factors such as the borrower's credit history, financial statements, collateral, and industry trends.
The grading system typically ranges from A to D, with A being the lowest risk and D being the highest.
For example, a borrower with a good credit score, stable income, and valuable collateral may be assigned an A grade, while a borrower with poor credit history and no collateral may be assigned a D grade.
Loan grading is important for both lenders and borrowers as it helps to determine the interest rate, loan amount, and repayment terms.

Accepted Answer

Loan grading is a classification system that involves assigning a quality score to a loan based on a borrower credit history, quality of the collateral, and the likelihood of repayment of the principal and interest. A score can also be applied to a portfolio of loans.

What is loan grading?

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