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Credit Risk Checklist
Creditworthiness Assessment
Review the applicant's credit score and history
Evaluate the applicant's income and employment stability
Verify the applicant's debt-to-income ratio
Check for any existing liens or obligations
Assess the applicant's financial statements and tax returns
Collateral Evaluation
Appraise the value of the collateral offered
Verify the ownership and title of the collateral
Assess the marketability and liquidity of the collateral
Check for any existing liens or encumbrances on the collateral
Ensure the collateral meets the institution’s lending criteria
Loan Structure and Terms Review
Determine the appropriate loan amount based on credit risk
Establish the loan repayment schedule
Set the interest rate according to the risk profile
Define the loan covenants and conditions
Ensure compliance with regulatory requirements
Risk Mitigation Strategies
Consider requiring a co-signer or guarantor
Evaluate the need for credit insurance
Determine the necessity of setting up an escrow account
Implement periodic financial reviews of the borrower
Establish a clear plan for dealing with potential defaults
Approval and Documentation
Prepare the loan approval documentation
Ensure all conditions and covenants are included in the loan agreement
Verify the accuracy and completeness of all submitted documents
Obtain the necessary approvals from relevant authorities
Finalize and execute the loan agreement with all parties
