What term describes a loan that is in default or near default that the creditor believes will not be collected in full?

What term describes a loan that is in default or near default that the creditor believes will not be collected in full?

• A. Non-Performing Loan
• B. Draw Request
• C. Current Ratio Calculation
• D. Program for Safeguarding Proprietary Info

Answer: (A)

Understanding loan quality and impairment helps identify the term described here. A loan that is in default or near default and for which the creditor believes full repayment is unlikely is a non-performing loan. This designation signals weak credit quality and prompts the lender to assess impairment and establish an allowance for credit losses, potentially leading to a write-off if collection becomes unlikely. A draw request is simply a request to withdraw funds from a line of credit, not a status of collectibility. The current ratio calculation is a liquidity measure (current assets over current liabilities), not a loan’s status. A program for safeguarding proprietary information is unrelated to loan quality.

Understanding loan quality and impairment helps identify the term described here. A loan that is in default or near default and for which the creditor believes full repayment is unlikely is a non-performing loan. This designation signals weak credit quality and prompts the lender to assess impairment and establish an allowance for credit losses, potentially leading to a write-off if collection becomes unlikely. A draw request is simply a request to withdraw funds from a line of credit, not a status of collectibility. The current ratio calculation is a liquidity measure (current assets over current liabilities), not a loan’s status. A program for safeguarding proprietary information is unrelated to loan quality.