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Abstract

Defaulting on a loan is the failure of a borrower to pay the principal or interest on security or loan. The consequences of defaulting on a loan depend on whether the loan is unsecured (student loans, credit cards, or personal loans) or secured (car loans or mortgages). In either case, it is suggested that consumers opt for debt consolidation plans as a means of satisfying creditors in order to avoid the repercussions of loan default. This study reviews related literature on the effects of loan default on the financial performance of Ecobank. Personal loans are regarded as high-cost, high-risk unsecured loans. Defaulting on one can cause your credit score to plunge. As your credit score drops interest rates on your adjustable-rate loans, such as credit cards, increase significantly. Loan default is the inability to repay the loan by either failing to complete the loan as per the loan agreement or neglecting to service the loan. The types of loan default review adopted for this study as they fall within the purview of this study are; technical default and debt services default. The provisions for loan defaults reduce the total loan portfolio of banks and as such affects interest earnings on such assets. This constitutes a huge cost to banks. A study of the financial statement of banks indicates that unsecured loans have a direct effect on the profitability of banks. This is because the charge for bad debts is treated as expenses on the profit and loss account and as such impact negatively on the profit position of banks. Despite the above research-related evidence on the effect of bad loans on banks, it is realized that the general contribution to the academic debate on the subject is weak.

Keywords

Loan default loans financial statement banking Ecobank.

Article Details

How to Cite
Animah Ofosu-Hene, V. (2022). Literature Reviews on Loan Default’s Impact on Ecobank Finances. Journal of Engineering Applied Science and Humanities, 7(1), 24–36. https://doi.org/10.53075/Ijmsirq/675063264

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