Question

Match the examples to the relevant factors required to seek credit from the bank

Answer 1

Banks assess a borrower's creditworthiness by evaluating their income sources, conducting a credit check, and possibly requiring a cosigner or collateral.

Step-by-step explanation:

There are several key factors that banks consider when assessing a borrower's creditworthiness. These include:

1. Income Sources: Banks require prospective borrowers to fill out forms regarding their sources of income. This provides an understanding of the borrower's ability to repay the loan.
2. Credit Check: A credit check on the borrower's past borrowing history helps the bank assess the risk of lending.
3. Cosigner: If there is doubt about the borrower's ability to repay, a bank may require a cosigner - another individual or entity that agrees to repay the loan if the original borrower cannot.
4. Collateral: This is property or equipment that can be seized and sold by the bank should the borrower fail to repay the loan.

These steps help a bank mitigate the risk associated with issuing a loan, especially given imperfect information about a borrower's financial reliability.