Doubtful Loan

You might think of every loan you take out as doubtful that you’ll be able to pay it back, but this is actually an official name that lenders use to categorize loans they make.

If a loan is deemed “doubtful,” the bank has come to the conclusion that is not protected by the current worth or paying capacity of the borrower, or the value of the collateral that was pledged changes for the worse (such as your house or bank account). Lenders even rate their doubtful loans in a range from “complete loss” to “uncertain loss.” Perhaps they begin to panic when they read about a borrower filing Chapter 11 in the newspaper, or the value of the house that was put up as collateral suddenly tanks during a recession.