Questions tagged [credit risk]

noah_stokes_photographer Fri Jan 24 2025 | 6 answers 1177

I want to know what characteristics or factors creditors take into account when they evaluate whether someone is a good credit risk or not.

GwanghwamunGuardianAngelWings Fri Jan 24 2025 | 0 answers 0

I'm trying to understand the 5 C's of credit risk. I've heard it's an important concept in assessing creditworthiness, but I'm not sure what the specific components are. Can someone explain the 5 C's and how they relate to credit risk?

isabella_bailey_economist Tue Jan 21 2025 | 5 answers 969

I want to understand the process through which a lender assesses and decides on the credit risk of an individual. What factors are considered and how does this evaluation impact the lending decision?

Daniele Mon Jan 20 2025 | 5 answers 726

I'm curious about how lending institutions evaluate the credit risk when considering loan applications. What factors do they look into to assess whether a borrower is likely to default on the loan?

CryptoGuru Wed Oct 02 2024 | 0 answers 0

So, let's delve into the question of how risky peer-to-peer (P2P) lending truly is. Firstly, we have to consider the psychological risk that comes with it. What do I mean by that? Well, investing in P2P can be a highly emotional experience, especially if you're not diversified enough and all your eggs are in one basket. It's important to stay level-headed and not let your emotions dictate your decisions. Next up, we have the issue of concentration risk. This is where you're putting too much of your capital into a single borrower or a small group of borrowers. If something goes wrong with these borrowers, you could end up losing a significant portion of your investment. Diversification is key here, spreading your investments across multiple borrowers to minimize this risk. Finally, we can't ignore the credit risk associated with P2P lending. Essentially, this is the risk of losing money due to bad debts. Borrowers might not be able to repay their loans for various reasons, and you as the investor could be left holding the bag. It's crucial to thoroughly research and VET potential borrowers before investing, as well as to have a clear understanding of the risks involved. So, in summary, P2P lending does come with its own set of risks, including psychological, concentration, and credit risks. However, with proper due diligence and risk management strategies, investors can minimize these risks and potentially reap the rewards of higher returns than traditional investment options.