Question

Which of the following would have the lowest credit risk for a bank/lender?

A Truck loan Correct Answer Incorrect Answer
B A mobile purchased on EMIs Correct Answer Incorrect Answer
C Loan given through a NBFC-P2P Correct Answer Incorrect Answer
D Loan against property (LAP) Correct Answer Incorrect Answer
E Loan against shares (LAS) Correct Answer Incorrect Answer

Solution

In case of a LAP, a mortgage loan is created where a property is available to the bank as security against the loan, which is an appreciating asset. In case of vehicle loan, the mortgage is created on the vehicle but it being a depreciating asset, the risk of recovery in case of default is still high. In case of LAS, the security is a volatile asset (shares value can change substantially) while credit card is an unsecured personal loan where credit risk is high.

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