According to recent financial news, retrospective analysis involves the evaluation of the potential borrower’s historical performance, analyzing the risks inherent to them and how they were overcome. This process aims to identify factors in the current condition of the borrower that may hinder the payment of the debt.
Furthermore, in any situation of credit analysis, there are three distinct stages. Trend Analysis: projection of the future condition of the borrower in order to assess the debt levels and how expensive the loan will be expected to arise.
Creditworthiness: from the level of risk that the borrower presents and projection of its future debt levels, assess the creditworthiness of the borrower, that is, the amount of capital which he can obtain from the lender.
To implement a thorough analysis of the operation risk of lending to individuals, we must go through some different stages during the process.