Age Consideration in Credit Evaluation
Question
Bob Richardson has had three loan applicants this morning:
" Heather Smith, age 17, who needs a car loan for $9,500 for 3 years
" John Bako, age 42, who would like a stock loan for $15,000 for 1 year
" Maynard Williams, age 70, recently retired, who needs a $50,000 home improvement loan for 12 years Bob's bank uses a judgmental credit evaluation system.
For which of these applications is Bob able to consider the age of the applicant as a factor in the decision making process?
Answers
Explanations
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A. B. C. D.D
In the given scenario, Bob Richardson is using a judgmental credit evaluation system to evaluate loan applications. This means that he is using his own judgment and experience to assess the risk associated with each applicant's ability to repay the loan.
The age of the applicant is one of the factors that can affect their creditworthiness. Younger applicants may have limited credit histories, which can make it difficult for lenders to evaluate their creditworthiness. On the other hand, older applicants may have fixed incomes or limited earning potential, which can also affect their ability to repay the loan.
Based on the information provided, the following are the details about each loan application:
- Heather Smith, age 17, who needs a car loan for $9,500 for 3 years.
- John Bako, age 42, who would like a stock loan for $15,000 for 1 year.
- Maynard Williams, age 70, recently retired, who needs a $50,000 home improvement loan for 12 years.
Now, let's consider each option:
A. All of them: This answer is unlikely to be correct as not all loan applicants' age is equally relevant to creditworthiness. It's possible that age may be a factor for some loan applications, but not for all.
B. None of them: This answer is also unlikely to be correct as age can be a factor in some credit evaluations, particularly for loans with longer repayment periods, like a home improvement loan.
C. Only Mr. Williams: This answer is more likely to be correct as Mr. Williams is the only applicant whose age is specifically mentioned as a relevant factor (he is 70 years old and recently retired). This may be a concern for the bank as fixed-income retirees may have limited earning potential to repay a loan.
D. Mr. Williams and Ms. Smith: This answer is less likely to be correct as Ms. Smith's age (17 years old) may not be as relevant as Mr. Williams' age (70 years old) to evaluate her creditworthiness. However, it's possible that the bank may consider age as a factor in evaluating both applications, especially if they are concerned about a borrower's limited credit history or earning potential.
In conclusion, option C is the most likely correct answer, as the information provided suggests that Mr. Williams' age may be a factor in the credit evaluation process. However, it's possible that age could also be a factor in evaluating other loan applications, depending on the specific circumstances of each case.
