Automated underwriting is a process in which a computer system evaluates a loan application using predetermined criteria. The system then assigns a risk score to the applicant, which is used to determine whether or not the loan should be approved. Automated underwriting can be used for both personal and business loans. For personal loans, the … Read more
A personal guarantee is a document that is typically used in conjunction with a loan or line of credit. The personal guarantee essentially states that the individual signing the document is personally responsible for repaying the loan should the borrower default. In most cases, the personal guarantee will also stipulate that the individual’s personal assets … Read more
When a borrower takes out a loan, the interest rate they pay is typically determined by the market conditions at the time of borrowing. However, some loans come with an interest rate floor, which is the minimum interest rate the borrower will pay over the life of the loan. There are a few different ways … Read more
Recourse is the legal right of a creditor to demand payment from a debtor, or from a third party who has guaranteed the debt, in the event that the debtor fails to pay. In the context of loans, recourse allows the lender to seek repayment from the borrower or from a guarantor if the borrower … Read more
A negative pledge clause is a clause typically found in a loan agreement that prohibits the borrower from pledging, assigning, or otherwise encumbering any of its assets without the prior consent of the lender. The purpose of the clause is to protect the lender’s interest in the borrower’s assets and to ensure that the borrower … Read more
A non-amortizing loan is a loan in which the borrower pays only the interest on the loan for a specified period of time, after which the entire loan is due. The advantage of a non-amortizing loan is that the borrower can lower their monthly payments by paying only the interest for a specific period of … Read more
An adjustment credit is a type of loan that is typically used to finance the purchase of a new or used vehicle. The loan is typically repaid over a period of time, and the interest rate is typically fixed. What is the difference between a debit and credit adjustment? Debits and credits are two basic … Read more
Usury is the practice of lending money at unreasonably high interest rates. It is considered a form of exploitation, as it can trap borrowers in a cycle of debt that is difficult to escape. In many jurisdictions, there are laws in place to protect borrowers from usurious lenders, by capping the amount of interest that … Read more
The legal lending limit is the maximum amount of money that a person can borrow from a financial institution. The limit is set by law and is designed to protect consumers from taking on too much debt. The limit typically applies to unsecured loans, such as personal loans and credit cards. What interest rate is … Read more
A nonperforming loan (NPL) is a loan that is in arrears or has been deemed unlikely to be repaid by the borrower. In most cases, an NPL is a loan that is at least 90 days overdue. NPLs are considered to be “nonperforming assets” (NPAs) and are typically sold by banks to third-party investors at … Read more
