Answer:
Explanation:
A key factor that a bank considers before setting out interest on a loan is the associated risks which is evaluated through a number of ways.
The first step is assessing the credit worthiness through the credit score analysis based on the credit history.Poor credit rating attracts higher interest rate.
Another thing is the repayment period , the longer the repayment period , the higher the risk and interest rate and vice versa.
Also considered is the down payment , a high down payment means that the probability of defaulting is lower and so also the risk , but when the down payment is low , a higher risk and interest is attached.
