Merrimack Valley CU
Auto & Personal Mortgage & Home Equity Undergraduate, Graduate, & Refi Commercial Loans & Lines Former RTN Members

Online Banking

Forgot Username?

Forgot Password?'; } ?>

Register

Need Help?

Online Banking

Forgot Username?

Forgot Password?

Register

Need Help?

Home / What do you mean by risk-based lending?

What do you mean by risk-based lending?

As per the NCUA (National Credit Union Administration):

Risk-based lending is a means by which a credit union may be able to more effectively meet the credit needs of all its members. It involves setting a tiered pricing structure that assigns loan rates based upon an individual’s credit risk. Risk-based lending generally has the most significant benefit for two broad categories of borrowers:

  • those attempting to “repair” their credit due to previous mishandling of credit (e.g., seriously past due credit, prior charge-offs, bankruptcy, etc.) 
  • those attempting to establish credit (e.g., first-time borrowers, borrowers with little credit history).

Although the rates paid by borrowers with less than perfect credit histories are higher than rates paid by borrowers with strong credit histories, these members are able to obtain loans without paying the excessive fees charged by many alternative “financial providers” such as finance companies, rent-to-own stores, title loan companies, and pawnshops.

Evaluate your credit score

A good credit score can mean better rates on credit cards and loans! Keep track of your financial health by checking your credit score for free once annually by visiting www.annualcreditreport.com. Explore our Credit Counseling options for professional assistance. Take control of your financial security today!

This answer has been viewed 654 times.



Related Questions