This section describes the types of commercial loans that will be available to business participants, given the size and complexity of the credit union, its creditworthiness, risk appetite, level of risk tolerance and underwriting. The types of loans that are usually provided include: – mortgages, term loans, operating credit lines – construction mortgages – housing loans – letters of credit – syndicated loans – leasing.
Loan limits for a person or related parties. The policy should determine all credit limits and restrictions, including: – the total amount of loans allowed for one borrower or group of borrowers; – the maximum amount of one loan by type: o the maximum amount of the loan, expressed in dollars or as a percentage of the capital required in accordance with the law, and in accordance with the data of their latest audited financial statements; o limit amount for each type of loan. – the total amount by industry and loans; – general limits for large and large loans; – the ratio of the loan to value; – risk levels of the entire portfolio; – the need for prior approval of the Board with respect to any loan granted to a limited person, and any exceptions to the criteria and limitations of underwriting; – the need to review credit limits at least once a year.
This section discusses the relevant underwriting criteria that should be set and maintained with care, including: credit criteria and guarantee requirements that reflect industry standard practices; minimum criteria and restrictions that the borrower must meet before granting a loan, for example: financial capabilities and the borrower’s credit rating; his financial situation (profitability, financial indicators); ratios showing financial results; the use of a stress test to measure solvency in case of an increase in interest rates, extension of maturity; risk rating level; type of business; conducting assessments / evaluations in accordance with the standards established in the policy; environmental assessments and other assessments as necessary; managerial skills;
Prospects for successful trading. Setting a general limit for large loans serves to reduce the risk of concentration. For example, if the portfolio contains a significant amount of large loans, there is a risk of a lack of funds to cover applications for loans of other participants or even the risk of significant losses if the loan is not available. coming back. Commercial credit policy should cover, in addition to general limits, large credit cases, which are described below: • Set thresholds, individual limits and aggregate limits for loans, the amount of which is high; establish the frequency and extent of supervision that will be exercised in relation to large loans; establish the content of reports submitted to the Council and the frequency of their submission.
Supervision of large loans should be carried out more often and more widely than for smaller loans. For example, it makes more sense to review large loans every six months, rather than once a year. The frequency of inspections of various types and sizes of loans should be described in detail in the policy and should be based on relevant business rules.
Property funding. A real estate loan is a passage for most households to finance the purchase of real estate. This is a position that can be very difficult in the budget for a long time. The buyer often incurs debts for fifteen, twenty or even thirty years. The borrower is protected by articles of the consumer code relating to mortgages. In addition to a bank loan, ancillary loans help finance part of the purchase. As a rule, they are tested for funds or previous efforts to save. Home savings loans can also be interesting if their rate set when opening the plan is more competitive than market rates. In any case, the capital accumulated by you can be used as a personal contribution.
Before you make a deal, you need to get complete information about your financial situation, current and future. Keep track of your accounts and budget to know exactly how much money you have and what your current expenses are. Do not underestimate your lifestyle and have a realistic view of your future financial opportunities. Your repayment ability is the maximum amount of a monthly payment (principal, interest and insurance) that you can pay off. Usually, monthly payments do not exceed 33% of your annual net income. We are talking about the maximum debt ratio.