Lending is an important step (or operation) in the loan process. It refers to the process in which the loan application submitted by the borrower is reviewed and approved, and the lending institution issues the loan to the borrower. After the loan is received, the borrower can use the loan amount according to the purpose of the loan.

Credit lending can enable borrowers to obtain additional capital and promote the expansion of production and circulation scale. Therefore, credit lending is a kind of capital lending. It is one of the forms of bank lending. The risk of issuing credit loans is generally greater than other loans, so the interest rates are higher and many conditions are often attached.

Extended information

Risks of lending

Bank lending risks include credit risk and market risk. The risk caused by the borrower's subjective reasons is called credit risk, such as the borrower's inability to repay or refusal to repay. Failure to collect loans due to objective reasons will also cause credit risks to banks.

For example, the longer the loan period, the greater the possibility that the borrower's business environment will change, which may cause the borrower to be unable to repay in the future. If it is a mortgage loan, the quality of the collateral is not good, and the bank may suffer losses when dealing with the collateral in the future.

Market risk mainly refers to the loss of interest income from banks that lend money at fixed interest rates due to a significant increase in market interest rates or rising prices. Lending risk is an important factor that banks should consider when determining lending prices.

Reference source? Baidu Encyclopedia-Lending