About Credit AnalysisLearn More

Credit risk is the risk that the lender bears in the event that the borrower is unable to make the necessary payments for his debt obligations. In very simple words, credit risk or default risk occurs when the recipient of credit or money does not fulfill his obligation on the due date and refuses to pay the debt for any reason. Lenders and investors are exposed to the risk of default in almost all forms of credit extension. A higher level of default risk leads to a higher required return and, in turn, a higher interest rate.