A borrower applies for an Educational Loan for a highly reputed technical course. The loan amount covers 90 percent of the total cost of education. From the bank's perspective, what is the most significant credit risk mitigation factor if it approves this loan?

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Banking · Retail Lending

Verified Solution4 OptionsUpdated: October 2026👁️1 View

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The risk of default is lower because the student is highly likely to secure well-paying employment soon.

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Answer 1

The bank can ask the student to pay the remaining 10 percent of the fee as margin.

Answer 2

The risk of default is lower because the student is highly likely to secure well-paying employment soon.

Answer 3

The bank can earn higher interest income because the rate on Educational Loans is generally high.

Answer 4

The loan automatically qualifies for the Prime Minister's Awas Yojana (PMAY) subsidy.

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