The best credit policy amongst the given to be opted by the company and possibility of less default rate and administrative costs of Option 2 than Option 3 and reasons if any such possibility occurs. Evaluating Credit Policy: The process of evaluation of credit policy includes evaluating and analyzing the effectiveness of the lending policies in terms of the amount repaid back by the borrowers. Sometimes, it might happen that the lenders are pooling their investments at very productive avenues but the policies so devised for the transactions are not that effective that it binds the borrowers into a time limit and uniform mode of repayment of the amount so availed as the loan. Thus, during the evaluation process the glitches in the credit policies are re-worked in order to mend them to earn revenues.

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Chapter 28, Problem 1MC

Summary Introduction

To determine: The best credit policy amongst the given to be opted by the company and possibility of less default rate and administrative costs of Option 2 than Option 3 and reasons if any such possibility occurs.

Evaluating Credit Policy:

The process of evaluation of credit policy includes evaluating and analyzing the effectiveness of the lending policies in terms of the amount repaid back by the borrowers. Sometimes, it might happen that the lenders are pooling their investments at very productive avenues but the policies so devised for the transactions are not that effective that it binds the borrowers into a time limit and uniform mode of repayment of the amount so availed as the loan. Thus, during the evaluation process the glitches in the credit policies are re-worked in order to mend them to earn revenues.

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