Lesson 4 of 7

Credit losses: expected loss per loan and per cohort

The third term of the lending equation is the loans that are not repaid. This lesson explains how losses enter the accounts through provisions and write-offs, how expected loss is built for one loan from three numbers, how losses are measured across the book, why loans made in the same period should be followed as a cohort, and how recoveries and the cost of collecting set the loss when a borrower defaults.

Published 15 October 2026