Definition
Credit Appraisal is the process banks use to evaluate a borrower’s ability to repay a loan. It helps the bank decide whether to approve or reject a loan application.
How It Works
Banks assess the applicant’s income, repayment history, financial stability, and credit score. They also check the value of any collateral offered.
Importance
A proper credit appraisal ensures that loans are given only to reliable borrowers, reducing the chances of default.
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