Debt-to-Income Ratio and Loan Qualification

The possibility of losing money on an investment or business venture.

Various macroeconomic forces, changes to the market interest rate, and possibility of default by sectors of large corporations.

Bad publicity and the possibility of default on debt or failure in an undertaking.

<p>External risks are those not in direct control of the management, such as political issues and exchange rates, while internal risks include non-compliance or information breaches.</p> Signup and view all the answers

<p>Character; Credit history, borrower's reputation or track for repaying debts appearing on credit reports</p> Signup and view all the answers

<p>Higher borrowing costs are associated with higher credit risk levels, so yield spreads can be used to infer credit risk based on market participants' assessments.</p> Signup and view all the answers

<p>To gauge the creditworthiness of potential borrowers by estimating the chance of default and the risk of financial loss for the lender.</p> Signup and view all the answers

<p>A borrower's inability to repay a loan due to high recurring debts and a high debt-to-income (DTI) ratio.</p> Signup and view all the answers

<p>Risk-based pricing</p> Signup and view all the answers

<p>Periodically report its financial condition, Refrain from paying dividends, repurchasing shares, borrowing further, Repay the loan in full in certain events</p> Signup and view all the answers

<p>By purchasing credit insurance or credit derivatives</p> Signup and view all the answers

<p>Sovereign risk</p> Signup and view all the answers

<p>By adding together a borrower’s total monthly debt payments and dividing that by the borrower’s gross monthly income.</p> Signup and view all the answers

<p>The lower the DTI, the better the chance of qualifying for a new loan.</p> Signup and view all the answers

<p>A large contribution decreases the chance of default.</p> Signup and view all the answers

<p>Collateral gives the lender assurance that if the borrower defaults, the lender can repossess the collateral.</p> Signup and view all the answers