Question

Define Credit Appraisal in your own words and briefly explain why credit appraisal is important.
(Please include at least one example)

Answer 1

CREDIT APPRAISAL :

Credit appraisal is the process by which a lender appraises the technical feasibility, economic viability and creditworthiness of prospective borrower. It is a process of customer lies in assessing if that customer a liable to repay the loan amount in the specific time or not.

Credit appraisal basically refers to assessing a particular loan application or proposal in a manner to the repayment ability of the loan applicant. A lender conduct a credit appraisal chiefly to make certain that the bank gets back the money that it lends to its customers.

It is determined in terms of the norms and standards set by the banks. A very crucial step in the sanctioning of a loan, the borrower needs to be very careful in planning his Financial modes. The lender or the bank does credit appraisal to check if it can repay the loan.

IMPORTANCE OF CREDIT APPRAISAL :

1 ) To Ascertain the ability to repay

2) To decide the quantum of Credit

3) To judge the viability of project

4) To take correct credit Decision

5) To find out Liquidity

6) To find out Profitability and solvency​​​​​