To assess trust for loan repayment, banks evaluate income information, conduct credit checks, and may require cosigners or collateral to ensure that the borrower has the means and intent to repay the loan fully.
The traditional method of assessing trust to pay a loan includes a bank evaluating a prospective borrower's creditworthiness. Before making a loan, banks usually require borrowers to provide information about their income sources and conduct a credit check on the individual's past borrowing. Additionally, lenders may require a cosigner—a third party who pledges to repay the loan if the original borrower defaults—or demand collateral, which is property or equipment that the bank can seize and sell if the loan is not repaid. These measures help banks mitigate the risks associated with lending and ensure that borrowers are trusted to fulfill their financial obligations.