What is a credit exposition?
"credit exposure" is a term used to identify the total amount of the loan that the creditor has expanded to the debtor. This total amount may be represented by a single loan or includes more loans or credit lines that the creditor is willing to expand to the debtor. Creditors generally reduce this amount based on the degree or risk of lending certain amounts to specific debtors and seek to provide financial services while maintaining the potential for the default settings by these debtors in a certain percentage.
One of the simplest ways to understand the credit exposition is to consider the case of a typical house owner who decides to finance several debts through the same creditor as the bank. In this scenario, the consumer may have a mortgage and a car loan through the same bank. Because the relationship is established, the debtor returns to the bank to ask for a personal loan. When this happens, the bank looks at the total amount of prolonged loanThree of these debt obligations and determine the risk of credit exposure that the institution assumes whether this third obligation is approved. Usually, if the credit rating, the current debt load and the debtor's income is not considered sufficient to manage all three obligations of relative lightness, the bank will reduce its risk or exposure to the application for this personal loan.
Most creditors are willing to take over a higher level of credit exposure based on higher credit ratings, higher income levels and proven records with the settlement of past loans and other debts in time. Customers of this type can often be approved quickly, considering the risk of being acceptable, even if the loan amount is significant. At the same time, the applicant who has a good but not outstanding credit can simply because the credit exhibition that the creditor takes over is not considered acceptable due to the increased risk of failure.
creditorsmay try to minimize credit exposure in different ways, such as the sale of active loans to other creditors. In some cases, the evaluation of shifts in the customer's credit rating and the modification of the extended loan will also help reduce the degree or risk or exposure that the creditor bears. For consumers, make sure that all obligations apply in time, maintain healthy credit rating and generally manage financial resources with the highest level of efficiency, help maintain the credit exposure in reasonable limit and increase the potential of creditors to continue working with these consumers in the long term.