Choose Strong Borrowers With Credit Risk Analysis

The loan origination process is hardly ever easy. Financial institutions must ensure that they are choosing borrowers who will make timely payments, but at the same time, they do not want to alienate potential future customers. Consumer confidence might be increasing, and credit card delinquencies are lowering, but banks can still benefit from having comprehensive software tools in place.

For example, more shoppers are considering different types of loans to better meet their financial needs. While this can show immediate benefit to the consumer, it can be harmful in the long run if he or she does not pay close attention to the details.

Longer car loans are increasing in popularity, but many experts continue to caution customers from immediately jumping on an opportunity without sufficient planning.

Alec Gutierrez, senior market analyst of automotive insights for Kelley Blue Book, told CBS News that a $350 per month lease might seem tempting for some consumers, but it could get them into trouble. He explained that opting for a 72-month lease instead of a 48-month option could save shoppers around $200 per month if they are paying off a $25,000 car.

"The longer you extend your term, the longer it's going to take you to get out of a negative-equity position," Gutierrez said. "So those that take a longer term find themselves at greater risk of being under water for a longer period of time."

The Sun-Sentinel reported that South Florida residents are not only taking part in new car loans, but they are handling the financial changes well. Helen McGiffin, chief operating officer for Miramar-based Tropical Financial Credit Union, told the news source that with the aftermath of the recession ebbing away, consumers are more confident, and are taking control of their debt.

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