Banking · Risk-Based Pricing in Retail Lending
Under a risk-based pricing model for unsecured retail personal loans, which factor most directly determines the interest rate markup charged to an applicant?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1A fixed statutory cap set uniformly across all personal loans
- 2The applicant's family size according to national census records
- 3The borrower's probability of default derived from credit scores and debt-to-income ratio✓
- 4The applicant's proximity to the bank's corporate head office
Correct answer
The borrower's probability of default derived from credit scores and debt-to-income ratio
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