Loan Grading

This is one of those financial concepts that actually does what the name suggests! Loan grading is the process of accessing each loan, relative to the others, and working out how 'good' it is, in terms of how likely it is to be paid back.

The gradings for loans vary from country to country, typically on a five or six point scale, which are not necessarily hierarchical with the top being the best and the bottom the worst; sometimes the first categorisation simply means that the loan has not been categorised / or examined yet!

The lowest or worst grading a particular system will be a total write off, with the next grade up showing it as highly questionable; the highest level of reviewed loans is usually simply satisfactory.

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