What is a consequence of poor creditworthiness for borrowers?

What is a consequence of poor creditworthiness for borrowers?

• A. Higher interest rates on loans
• B. Easier approval for loans
• C. Increased loan amounts granted
• D. Larger credit limits on existing cards

Answer: (A)

Borrowers with poor creditworthiness typically face higher interest rates on loans. This occurs because lenders view individuals with a low credit score as higher risk, suggesting they are more likely to default on their obligations. To compensate for this increased risk, lenders charge more in interest. This means that the cost of borrowing becomes significantly higher for those with poor credit, affecting their ability to take on new debt and manage existing obligations effectively. Higher interest rates can lead to larger overall payments, making it more difficult for borrowers to achieve financial stability.

Borrowers with poor creditworthiness typically face higher interest rates on loans. This occurs because lenders view individuals with a low credit score as higher risk, suggesting they are more likely to default on their obligations. To compensate for this increased risk, lenders charge more in interest. This means that the cost of borrowing becomes significantly higher for those with poor credit, affecting their ability to take on new debt and manage existing obligations effectively. Higher interest rates can lead to larger overall payments, making it more difficult for borrowers to achieve financial stability.