Default Risk Analysis

Default Risk Analysis is the evaluation of the likelihood that a borrower, such as an individual or a company, will fail to pay back their debt. This involves assessing various factors, including the borrower’s financial health, credit history, and economic conditions. Lenders use this analysis to determine the risk of potential loss if the borrower defaults on their loan. A higher default risk may lead to higher interest rates or stricter loan terms, while a lower risk could result in more favorable borrowing conditions. Ultimately, it helps lenders make informed decisions about lending money.