The risk of a borrower defaulting on a loan is known as:
A) credit risk.
B) default risk.
C) loan risk.
D) asset risk.

Question

Quizplus · Accepted Answer

Credit risk is the risk of a borrower defaulting on a loan, and it is commonly used in credit analysis and loan underwriting. Default risk is a synonym for credit risk, so B) is also correct, but A) is a more common term in the finance industry. Loan risk and asset risk are broader terms that can encompass different types of risks, such as interest rate risk or market risk.

The Risk of a Borrower Defaulting on a Loan Is