PRICING OF UNSECURED LOAN BEING SET IN ACCORDANCE
WITH THE RISK BEING TAKEN BY THE CREDITOR
When the creditors lend money,...
Basically, when the creditors lend the debtors with unsecured bucks, they don’t possess
any security element. That is the ...
of 2

Pricing of unsecured loan being set in accordance with the risk being taken by the creditor

Pricing of unsecured loan being set in accordance with the risk being taken by the creditor
Published on: Mar 4, 2016
Published in: Business      
Source: www.slideshare.net


Transcripts - Pricing of unsecured loan being set in accordance with the risk being taken by the creditor

  • 1. PRICING OF UNSECURED LOAN BEING SET IN ACCORDANCE WITH THE RISK BEING TAKEN BY THE CREDITOR When the creditors lend money, they grant it as their business. Specially, when they lend unsecured loans, they will need to take a huge risk along with the business stuffs. This is why the creditors go through risk pricing of unsecured loan before they lend the bucks to the debtors. In fact, the fees and interest rates are the profit of the business. The creditors generally set the price of the loan product before they lend the money. And in terms of unsecured loans, they tend to become more calculative as this is a risky lending for them. Risk pricing of unsecured loan: You are already informed with the fact that the creditors go through risk pricing of unsecured loan before lending the bucks. The pricing on the loan will depend on how much risk they are going through. And the risk measurement will be done in accordance with your qualification for the loan. So, the creditors are not there to price the risk. Rather, the debtors are closely interrelated with this procedure. Determining the interest rate and fees: The risk pricing of unsecured loan resembles a procedure through which the interest rate and fees are being determined. In fact, loan is a financial product which has got a selling price. In terms of lending unsecured debts, the creditors count the risk associated with it. When the risk is higher, the interest rate and fees will tend to become higher. In other word, the loan will become an expensive product. On the other hand, when the risk is lower, the debt will become cheaper! Compensation: The risk pricing of unsecured loan is in another way can be named as compensation. In fact, the higher interest rate is being charged when the creditors are going through higher range of risk. Such interest rate can be assumed as a compensation for the higher risk being carried by the creditors. Generally, the debtors who are possessing poorer credit score have to pay this compensation. In fact, they will need to avail an unsecured loan with a higher interest rate! Security:
  • 2. Basically, when the creditors lend the debtors with unsecured bucks, they don’t possess any security element. That is the reason, if the debtors default or fail to pay the debts; they simply have nothing to extract the repayment. That is the reason, the creditors take precaution regarding lending the finance. That is the reason; they set the price of the loan in accordance with the risk. Also, if the debtors fail to pay the debts back, they are to be filed as bankruptcy. This is how the unsecured financing works. As there remains no security element, the creditors need to take more risk. And that’s how the pricing of the unsecured debts are being done! The bottom line: At the end, this can be said that, the price of the unsecured loans has to be set in accordance with risk concern when the creditors are intending to make profitable business out of it!

Related Documents