Credit Appraisal is neither entirely a ‘Science’ nor entirely an ‘Art’

Credit appraisal is neither entirely a science nor entirely an art. It is a mixture of science and art. Credit appraisal refers as a process of appraising the credit worthiness of an applicant for a loan. To gauge the credibility of the borrower, his or her sources of income, age, experience, number of dependents, repayment capacity, past and existing loans, nature of employment and other assets are taken into account. A lender conducts a credit appraisal chiefly to make certain that the bank gets back the money that is lends to its customers. It is a science of obtaining and analyzing the facts of a loan request and art of making judgments about that available information, the feasibility of the business, and the credibility of the borrower. It is a science of systematic and formulated knowledge, and art in which skills may be exercised. Earlier credit appraisal is only considered as it is just about the numbers. It is certainly true that financial performance and credit metrics are very significant when it comes to the decision of credit appraisal of the borrower but other factors are important also and have a significant influence on those decisions. It is an art of maintaining or defining the relationship of borrower with the lender or bank, and science of analyzing the credibility of the customer or borrower.