tailieunhanh - Commercial Banks and Consumer Instalment Credit

It is scarcely to be expected that banks operating in dif- ferent regions, serving different classes of customers and fol- lowing different policies, would have uniform experience. Therefore, for each of the factors to be analyzed, we have supplemented the composite analysis for all banks by an in- dividual analysis for each bank that submitted a sufficiently large sample. These individual analyses, which are presented in Appendix B, indicate the degree of variation among banks and the extent to which the average experience of all banks typifies theexperience of any one bank. It will be seen that in some instances the individual samples differ widely from one another, and thus from. | This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research Volume Title Commercial Banks and Consumer Instalment Credit Volume Author Editor John M. Chapman and associates Volume Publisher NBER Volume ISBN 0-870-14462-6 Volume URL http books chap40-1 Publication Date 1940 Chapter Title Factors Affecting Credit Risk in Personal Lending Chapter Author John M. Chapman Chapter URL http chapters c4732 Chapter pages in book p. 109 - 139 5 Factors Affecting Credit Risk in Personal Lending The Credit standing of an applicant for a personal loan is investigated intensively because it indicates within reasonable limits the likelihood of repayment. It should not be assumed however that a bank officer can foretell with certainty how faithfully a borrower will meet his obligations few applicants have economic prospects so bad that there is not some small chance of repayment and few are so well situated that there is not some possibility of delinquency or even default. The selection of borrowers must therefore rest on probabilities. On the basis of experience and to some extent intuition the loan officer decides which applicants are more likely to default than others or which loans are likely to involve collection costs so great as to render the transaction unprofitable. Willingness and ability of the borrower to repay the loan are the primary factors to be considered in any appraisal of credit risks. Applicants who may be attempting fraud are clearly undesirable as are those who though not strictly dishonest may appear to be irresponsible. The second criterion ability to repay may be tested by several standards by personal characteristics such as age sex and family status and by the borrower s occupational or economic position income and net worth. In general then the bank is interested in the moral personal vocational and financial characteristics of the applicant for a personal loan. The would-be borrower is .

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