Default Risk Assessment

Default risk assessment refers to the process of evaluating the likelihood that a borrower, such as an individual or a company, will fail to repay their debt obligations. This assessment helps lenders, investors, and credit agencies determine the creditworthiness of borrowers. Factors considered include the borrower’s credit history, income stability, financial health, and economic conditions. A higher default risk may lead lenders to charge higher interest rates or deny credit altogether, while lower risk can result in better borrowing terms. Essentially, it's about predicting the risk of non-repayment to make informed lending or investment decisions.