What are all the four pillars of underwriting?
There are different types of underwriting, such as paper-based underwriting, intuition-based underwriting, neighbourhood-based underwriting, etc.
Whatever the underwriting type, the principles of underwriting always remain the same.
1) Eliminating fraud – verifying KYC and other docs.
2) Intent to repay – past behaviour of repayment.
3) Ability to repay – what’s their disposable income (income minus expenses).
4) Your ability to collect on the loan – check if the borrower resides in your serviceable area.
The fourth point is not often stated aloud because it’s the most important part. Lending money is easy, but getting it back is difficult, and that differentiation distinguishes a good lending business from a bad one.