Percentage of Commercial Loans Secured by Collateral

Percentage of Commercial Loans Secured by Collateral

KPI Details

Percentage of Commercial Loans Secured by Collateral measures the dollar amount of outstanding commercial loans managed by the institution that are secured by collateral (secured loans) in relation to the total dollar amount of outstanding commercial loans (secured and unsecured) managed at the same point in time. Higher percentages of secured loans generally indicate that a financial institution's outstanding loans are considered to be higher dollar value loans, since secured loans offer lower rates, higher borrowing limits and longer repayment terms than unsecured loans. This metric is important to understand the financial institution's balance sheet breakdown of assets (secured and unsecured loans).

KPI Definition

The dollar amount of outstanding commercial loans managed by the institution that are secured by collateral (secured loans) divided by the total dollar amount of outstanding commercial loans (secured and unsecured) managed at the same point in time, as a percentage.

KPI Best Practices

• Offer incentives (e.g., lower rates) to commercial borrowers with available collateral
• Develop strict rules for the underwriting department to enforce the collateralization of loans
• Explore different methods to secure loan collateral such as cross collateralization

KPI Calculation Instructions Percentage of Commercial Loans Secured by Collateral?

Two values are used to calculate this KPI: (1) the dollar amount of outstanding commercial loans managed by the institution that are secured by collateral (secured loans), and (2) the total dollar amount of outstanding commercial loans (secured and unsecured) managed at the same point in time. Include all loans that are secured by collateral, such as home, auto, etc. in the numerator. Include all outstanding loans in the denominator.

KPI Formula :

(Dollar Amount of Outstanding Commercial Loans Managed That Are Secured by Collateral / Total Dollar Amount of Outstanding Commercial Loans Managed) * 100