Economic indicator<\/strong>: The level of non-performing loans in the banking sector can serve as an economic indicator, reflecting the financial health of borrowers and the overall economic conditions in a region or country.<\/p>\nEfforts are often made to prevent loans from becoming non-performing through risk assessment, credit monitoring, and proactive communication with borrowers facing financial difficulties. Nonetheless, non-performing loans are a common challenge in the lending industry, and managing them effectively is crucial for the stability of financial institutions.<\/p>\n
Example of a non-performing loan<\/h3>\n
Let’s say a bank lends R100,000 to a small business to expand its operations. Initially, the business makes regular monthly payments of R1,000 to repay the loan. However, due to economic difficulties, the business begins to struggle, and eventually, it stops making payments altogether.<\/p>\n
At this point, the loan becomes non-performing because the borrower has failed to meet its repayment obligations as agreed upon in the loan contract. The bank may then need to take steps to recover the outstanding debt, such as restructuring the loan, pursuing legal action, or writing off the loan as a loss.<\/p>\n","protected":false},"author":1,"template":"","class_list":["post-37984","business-glossary","type-business-glossary","status-publish","hentry"],"acf":[],"featured_image_urls_v2":{"full":"","thumbnail":"","medium":"","medium_large":"","large":"","1536x1536":"","2048x2048":"","image_blog":"","image_podcast":"","image_banking":"","image_blog_internal":"","image_blog_medium":"","image_single_banking":""},"post_excerpt_stackable_v2":"
Definition A non-performing loan (NPL) is a business loan that has stopped generating income for a lender because the borrower has failed to make the required interest or principal payments as per the agreed-upon terms. What is a non-performing loan? In other words, it’s a loan where the borrower has fallen behind on their payments to the extent that it is considered in default. Key points about non-performing loans (NPLs) include: 1. Default status: When a loan becomes non-performing, it means the borrower is in default, which is a breach of the loan agreement. This can occur due to various…<\/p>\n","category_list_v2":"","author_info_v2":{"name":"root","url":"https:\/\/swoopfunding.com\/za\/author\/root\/"},"comments_num_v2":"0 comments","_links":{"self":[{"href":"https:\/\/swoopfunding.com\/za\/wp-json\/wp\/v2\/business-glossary\/37984","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/swoopfunding.com\/za\/wp-json\/wp\/v2\/business-glossary"}],"about":[{"href":"https:\/\/swoopfunding.com\/za\/wp-json\/wp\/v2\/types\/business-glossary"}],"author":[{"embeddable":true,"href":"https:\/\/swoopfunding.com\/za\/wp-json\/wp\/v2\/users\/1"}],"wp:attachment":[{"href":"https:\/\/swoopfunding.com\/za\/wp-json\/wp\/v2\/media?parent=37984"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}