What is a key consideration in assessing a borrower’s ability to repay?

A key consideration in assessing a borrower’s ability to repay is the borrower’s credit history. This is because a credit history provides insights into the borrower’s past borrowing and repayment behavior, which helps lenders evaluate the likelihood of timely repayment on the current loan. A strong credit history typically indicates a borrower has responsibly managed their debts, while a poor credit history may signal potential repayment issues.

Understanding a borrower's credit history involves reviewing their credit score, payment history, outstanding debts, and any recent bankruptcies or defaults. This comprehensive assessment helps lenders make informed decisions about the risk associated with lending to a particular borrower. While factors like the duration of the loan term, total loan amount, and interest rate are also important in the lending process, they do not directly indicate the borrower's financial behavior and reliability in repaying borrowed funds.