First time hear about Benchmark Lending, we would thing that it is the terms that used by bank to compare several lending products. The basic things on benchmark lending is tries knowing the difference of several lending or loans products that suit to the customers needs and reliability.
Banks mostly used the benchmark to give the multiple choice to its customers, so they can give the best rate and the best condition applied to most of their clients. This strategy is to keep the bank with the most completed services in banking industries.
Basically, benchmark landing is loans products that available on the market, such as student loans, mortgage loans, personal loans, car loans and others. The banks then giving the compare of its products, starting from the features, benefits, cost and others component to give the client or customers clear and useful information related to their lending or loans need.
Meaning of Benchmark Lending
But, the true meaning of the benchmark lending is the rate that used by banks or financial institution to determine the loans rate that would be charged to their customers. The example of the benchmark lending is the LIBOR (London Inter Bank Offered Rate) it is the rate that used by the banks in London to loan from banks with in LIBOR members. In India there is MIBOR (Mumbai Inter Bank Offered Rate), has the same principles with the LIBOR, which the members are the banks that operated in India.
Determining Benchmark Lending
To Determine the benchmark lending, there are complicated and integrated technique to used, mostly its determine by measuring several factors in the banking or financial markets, such as inflation rate, economy, depo rate, deflation, money supply, exchange rates and others factors. Those factors then is calculated based on certain formulas which is in the ends will be represent the true lending rates that affordable for the markets.
