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Questions and Answers
What is the primary purpose of the CAMPARI model in credit risk assessment?
What is the primary purpose of the CAMPARI model in credit risk assessment?
- To guide credit officers in assessing consumer loan applications (correct)
- To evaluate the creditworthiness of a business loan application
- To assess the credit risk of a credit card holder
- To determine the interest rate for a mortgage loan
What does the 'A' in the CAMPARI acronym stand for?
What does the 'A' in the CAMPARI acronym stand for?
- Annual Income
- Assets
- Attitude
- Amount (correct)
What is the primary concern of a lender when evaluating a borrower's character?
What is the primary concern of a lender when evaluating a borrower's character?
- The borrower's attitude and sense of responsibility (correct)
- The borrower's credit history
- The borrower's ability to repay the loan
- The borrower's income level
What is the primary benefit of using the CAMPARI model in credit risk assessment?
What is the primary benefit of using the CAMPARI model in credit risk assessment?
What is the primary focus of the CAMPARI model in credit risk assessment?
What is the primary focus of the CAMPARI model in credit risk assessment?
What is the 'I' in the CAMPARI acronym?
What is the 'I' in the CAMPARI acronym?
What is the primary goal of a lender when evaluating a borrower's ability to repay a loan?
What is the primary goal of a lender when evaluating a borrower's ability to repay a loan?
What is the CAMPARI model based on?
What is the CAMPARI model based on?
What is a crucial aspect of evaluating insurance?
What is a crucial aspect of evaluating insurance?
What is the primary purpose of the CAMPARI model?
What is the primary purpose of the CAMPARI model?
Which of the following is NOT a component of the CAMPARI model?
Which of the following is NOT a component of the CAMPARI model?
What is the main advantage of using the CAMPARI model?
What is the main advantage of using the CAMPARI model?
What is the primary focus of the 5Cs framework?
What is the primary focus of the 5Cs framework?
What is the purpose of evaluating the loan repayment structure?
What is the purpose of evaluating the loan repayment structure?
What is the primary difference between the CAMPARI model and the 5Cs framework?
What is the primary difference between the CAMPARI model and the 5Cs framework?
What is the purpose of using the CAMPARI model in consumer lending?
What is the purpose of using the CAMPARI model in consumer lending?
What is the primary consideration when evaluating the amount of financing?
What is the primary consideration when evaluating the amount of financing?
What is the purpose of requiring the borrower to show commitment towards the loan?
What is the purpose of requiring the borrower to show commitment towards the loan?
What happens if the borrower requests a loan amount greater than the requirements listed in the purpose of the loan?
What happens if the borrower requests a loan amount greater than the requirements listed in the purpose of the loan?
What is the purpose of structuring the repayment of a loan?
What is the purpose of structuring the repayment of a loan?
What is evaluated when considering the repayment structure of a loan?
What is evaluated when considering the repayment structure of a loan?
Why is insurance protection required in asset-based financing?
Why is insurance protection required in asset-based financing?
What happens to the collateral value if the asset is damaged or destroyed by accident or fire?
What happens to the collateral value if the asset is damaged or destroyed by accident or fire?
What is the purpose of ensuring the security is maintained in a good state?
What is the purpose of ensuring the security is maintained in a good state?
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Study Notes
The CAMPARI Credit Risk Assessment Framework
- The CAMPARI model is an alternative risk framework to evaluate consumer loan applications.
- It is less complex than the 5Cs framework used for business lending.
- The model ensures the lending bank of a portfolio of quality consumer loans.
Amount of Financing
- The amount of financing is evaluated based on the borrower's need and capacity to repay.
- The amount depends on the bank's requirement for the borrower to show commitment towards the loan.
- The bank reduces risk for both the borrower and the bank.
Repayment Structure
- The repayment of a loan can be structured in different ways to meet the borrower's needs and debt servicing ability.
- The repayment can be evaluated in terms of:
- Total length of time (tenor of the proposed loan)
- The repayment amount for each loan instalment and the number of instalments
- The frequency of instalment payments (e.g. weekly, monthly, or quarterly)
Insurance
- In asset-based financing, the underlying asset often becomes the security for the lending bank.
- The bank must ensure the security is maintained in a good state and continues to hold stable value.
- Adequate insurance protection is a requirement, evaluated in terms of:
- Appropriate insurance risk coverage (e.g. fire, accident, or theft)
- Appropriate amount of insurance cover
- Reputation of the insurance company
- Confirmation of insurance premium payments and annual renewal
Key Terms
- Margin of advance
- Asset-based financing
- Purpose of the loan
- Amount of financing
- Repayment of a loan
- Debt servicing capacity
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