Uniform Rules for Collections (URC)
What are the Uniform Rules for Collections (URC)? The Uniform Rules for Collections is a set of rules that help assist in the process of collecting debts or owed money or assets. The URCs were established – or proposed – by the International Chamber of Commerce (ICC), a worldwide organization that serves to promote and...
Credit Risk Analysis Models
What are Credit Risk Analysis Models? Financial institutions used credit risk analysis models to determine the probability of default of a potential borrower. The models provide information on the level of a borrower’s credit risk at any particular time. If the lender fails to detect the credit risk in advance, it exposes them to the...
Balloon Payment
What is a Balloon Payment? A balloon payment, simply put, is a large payment that is due at the end of a loan term. It is different from a fully amortized loan, where a loan is paid back in small but equal payments. Balloon Loan vs. Fully Amortized Loan A balloon loan comprises a...
Default Risk
What is Default Risk? Default risk, also called default probability, is the probability that a borrower fails to make full and timely payments of principal and interest, according to the terms of the debt security involved. Together with loss severity, default risk is one of the two components of credit risk. Assessing Default Risk While...
Bank Credit Analysis
What is Bank Credit Analysis? In bank credit analysis, banks consider and evaluate every loan application based on merits. They check the creditworthiness of every individual or entity to determine the level of risk that they subject themself by lending to an entity or individual. Clients with a high level of risk are less desirable...
