Credit Evaluation Criteria Quiz

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What unethical practice involves a conspiracy between the borrower or bank employees for loan approval?

Clarity

Collusion (correct)

Consanguinity

Connection

What is the advantage of having blood relations with the DIRECTORS, OFFICERS, STOCKHOLDERS AND RELATED INTEREST (DOSRI) in loan applications?

Guaranteed loan approval

Higher chances of loan approval (correct)

Lower interest rates

Quicker loan processing

Which culture still influences the evaluation or approval of loan applications?

Curiosity culture

Collegial culture

Kumpare / padrino / pañero culture (correct)

Credence culture

What should the information gathered for the credit evaluation process be to obtain the desired credit judgment?

Credible, dependable, reliable (B) Signup and view all the answers

Who bears the responsibility for rendering judgment on loan applications in a fair and equitable manner?

A group with credit evaluation expertise (D) Signup and view all the answers

What is essential for credit investigators and evaluators according to the text?

Curiosity for data gathering (D) Signup and view all the answers

What does the 'C' in 'Cs in Communication' stand for?

Clarity (C) Signup and view all the answers

Which of the following is NOT a characteristic of a well-prepared credit report?

Ambiguous (C) Signup and view all the answers

What does the principle of 'Coordination' emphasize?

Cooperation between different organizational units (D) Signup and view all the answers

Which of the following is NOT mentioned as a characteristic of a well-prepared credit report?

Creative (C) Signup and view all the answers

What does the principle of 'Completeness' emphasize?

Providing a detailed and thorough credit report (B) Signup and view all the answers

Which of the following is NOT a responsibility of the credit department?

Promoting creativity in credit report writing (A) Signup and view all the answers

Why is it important for the lender to know the purpose of the loan?

To ensure the loan proceeds will be disbursed according to the borrower's plan. (D) Signup and view all the answers

What does 'commitment' refer to in the context of a loan application?

The borrower's equity in the business subject to the loan application. (B) Signup and view all the answers

Why do lenders conduct an ocular inspection or end use verification?

To understand the borrower's objectives and ensure loan proceeds are used as intended. (B) Signup and view all the answers

Why is it essential for lenders to be cautious in evaluating loans?

To ensure fair credit judgment and manage risks associated with lending. (A) Signup and view all the answers

What does 'protection' represent in a credit transaction?

The collateral and secondary sources of repayment in case of default. (A) Signup and view all the answers

How does knowing the purpose of a loan aid in structuring its repayment schedule?

By determining when the borrower will receive cash flows for repayment. (B) Signup and view all the answers