Comerica Interview Question: For a business wanting to tak... | Glassdoor

Interview Question

Underwriting Associate Interview Kalamazoo, MI

For a business wanting to take out a loan, what 3 financial

  equations would you use to decide if it was credit worthy or not?
Answer

Interview Answer

3 Answers

0

Some stuff I found online about financial equations used in underwriting...

(1) Debt to Equity Ratio = Monthly Debt Payments / Gross Monthly Income
* basically calculates the ability to pay back loan
* the smaller the ratio, the better (ideally below 37%)... the more income the client has to cover the debt payments, the better
* GROSS means before-tax

(2) Loan to Value Ratio = Loan Amount / Value of Collateral
* if LTV ratio is outside of lender's parameters, a higher down payment could be required
* using collateral could be less risky than something unsecured like a credit card
* the higher the LTV, the riskier the loan is for the lender
* sometimes institutions will still grant a loan with high LTV if prospective client has good credit score and mortgage history but will probably require insurance

Still not sure what a

Anonymous Prospective Interview Candidate on Jun 2, 2015
0

Some stuff I found online about financial equations used in underwriting...

(1) Debt to Equity Ratio = Monthly Debt Payments / Gross Monthly Income
* basically calculates the ability to pay back loan
* the smaller the ratio, the better (ideally below 37%)... the more income the client has to cover the debt payments, the better
* GROSS means before-tax

(2) Loan to Value Ratio = Loan Amount / Value of Collateral
* if LTV ratio is outside of lender's parameters, a higher down payment could be required
* using collateral could be less risky than something unsecured like a credit card
* the higher the LTV, the riskier the loan is for the lender
* sometimes institutions will still grant a loan with high LTV if prospective client has good credit score and mortgage history but will probably require insurance

Still not sure what a

Anonymous Prospective Interview Candidate on Jun 2, 2015
0

accidentally submitted the answer without finishing but here's a good link to help!

http://smallbusiness.chron.com/good-ratios-receive-approval-commercial-loan-3980.html

Prospective Interview Candidate on Jun 2, 2015

Add Answers or Comments

To comment on this, Sign In or Sign Up.