Fair Credit Reporting Act (FCRA)
What is the Fair Credit Reporting Act (FCRA)? The Fair Credit Reporting Act (FCRA) safeguards against erroneous and unjust treatment of a consumer’s credit report. Since 1970, this US legislation has guarded the sanctity of financial identities and upheld the principle of fair and accurate reporting. Ongoing rulemaking from the US government ensures any reporting...
Borrowing Base
What is a Borrowing Base? A borrowing base represents the adjusted value of eligible collateral that a lender will be extending credit against, before applying a discount factor (e.g. maximum LTV) that determines the credit limit. Borrowers pledge many different categories of assets as security for a loan. But the book value of those assets...
Credit Policy
What is a Credit Policy? An organization that advances credit and lends to others must consistently ensure that new business aligns with its credit risk tolerance. Similarly, it must effectively collect debts to limit credit losses and safeguard its assets. A credit policy is the complete guidelines and processes for executing this corporate credit strategy....
LTV (Loan-to-Value)
What is LTV (Loan-to-Value)? LTV represents the proportion of an asset’s value that a lender is willing to provide debt financing against. It’s usually expressed as a percentage. LTVs tend to be higher for assets that are considered more “desirable” as collateral. The desirability of an asset as collateral is generally measured by how stable...
Debt Default
What is a Debt Default? An event of debt default occurs when one or more terms in a loan agreement are violated (or breached) by a borrower. When a lender extends credit to a borrower, both parties agree to loan terms by way of a loan agreement. These loan agreements typically include a section that...
