Credit Risk Assessment: Amount of Financing

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What is the primary consideration when evaluating the amount of financing?

Borrower's need and capacity to repay (correct)
Bank's profit margin
Security offered by the borrower
Borrower's reputation

Why is it important for the borrower to show commitment towards the loan?

To reduce risk for both the borrower and the bank (correct)
To ensure prompt repayments
To increase the loan amount
To build trust with the lender

What happens when a borrower requests a loan amount greater than the requirements listed in the purpose of the loan?

The borrower is asked to provide additional security (correct)
The loan request is rejected
The loan is automatically approved
The credit officer re-evaluates the loan purpose

What is the purpose of evaluating the repayment structure of a loan?

To reduce the bank's risk and ensure loan safety (A) Signup and view all the answers

What is the primary reason for ensuring adequate insurance protection in asset-based financing?

To protect the asset from damage or destruction (C) Signup and view all the answers

What is the impact of asset damage or destruction on the collateral value?

It reduces the collateral value (D) Signup and view all the answers

Why is the underlying asset important in asset-based financing?

It provides credit protection (A) Signup and view all the answers

What is the purpose of evaluating the total length of time of a loan?

To evaluate the repayment structure (D) Signup and view all the answers

What is an essential aspect to evaluate in terms of insurance?

Appropriate insurance risk coverage (D) Signup and view all the answers

What is the purpose of the CAMPARI model?

To assess consumer loan applications (C) Signup and view all the answers

What is NOT a component of the CAMPARI model?

Insurance premium payments (D) Signup and view all the answers

What is the significance of the CAMPARI model in consumer lending?

It ensures a portfolio of quality consumer loans (A) Signup and view all the answers

What determines the loan repayment structure of a consumer loan?

Debt servicing capacity (D) Signup and view all the answers

What is an important aspect of evaluating consumer loan applications?

Credit history of the borrower (A) Signup and view all the answers

What is NOT a key term related to consumer lending?

Insurance premium payments (B) Signup and view all the answers

What is the significance of the 5Cs framework?

It is used for business lending (A) Signup and view all the answers

What is the primary purpose of the CAMPARI model in credit risk assessment?

To guide credit officers in assessing loan applications (B) Signup and view all the answers

What does the 'C' in CAMPARI stand for?

Character (A) Signup and view all the answers

Why is the character of an individual borrower important in credit risk assessment?

Because it determines the borrower's attitude and responsibility to repay the loan (D) Signup and view all the answers

What is the CAMPARI model used to assess?

Consumer loan applications (D) Signup and view all the answers

What is the CAMPARI model an alternative to?

The 5C framework (D) Signup and view all the answers

What is the primary focus of the CAMPARI model in credit risk assessment?

Assessing the creditworthiness of a borrower (B) Signup and view all the answers

What is the CAMPARI model based on?

Risk acceptance criteria pre-approved by the bank (C) Signup and view all the answers

How many components does the CAMPARI model consist of?

7 (C) Signup and view all the answers