When evaluating risk to a lender when offering loans there are two main considerations. The first is the individual’s ability to pay, and the quality and stability of the collateral pledged as security for the loan.
Ability to repay
Income types
Real time statistical analysis of different job types and how long individuals have been in that position is an example of where technology can help evaluate risk. Numbers of graduates with qualifications in different fields can impact the supply of people in each sector.
Changes in personal circumstances
Illnesses and illness in other family members could impact the individual’s income. People having children and related changes in working hours can also impact income and affordability. Using software tools linked to statistics is a useful way to evaluate risk
Quality of Collateral
In the UK loans are usually secured on property, both residential and commercial. A study of land registry price data is an obvious starting point for establishing trends and making predictions for future property values. For more information go to https://www.concisefinance.co.uk/
Other property linked assets can also be useful including stock and bond prices of British banks, and data from real estate investment trusts. If property related assets are very liquid and easy to buy and sell this is a good sign. If assets are illiquid this could be a sign of stress.
Some more aggressive loan products and equity release products could rely on property price appreciation to make them able to compete.
Interest Rate considerations
Analysis of government bond yields in real time from maturities in months to thirty years could be important to some lenders offering long term fixed rates.
In the case of equity release, the lender does not know exactly when the people occupying the home will die and the home can be sold to repay the loan and the interest that has built up. Software that studies life expectancy could be very important. For more info click to https://www.frequentfinance.co.uk/
