> For the complete documentation index, see [llms.txt](https://docs.teller.org/teller-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.teller.org/teller-docs/teller-nodes/advanced-topics.md).

# Credit Risk Algorithm (CRA)

Teller’s unique approach computes consumer credit and banking data to generate loan terms for users. 

The key to this computation is the Risk Premium Interest Rate, which is the global premium for the risk of a loan. This rate can be voted on through the Teller Governance module.

The Interest Rate premium can be decreased by the following input variables.

## Collateral

![](/files/-MOqzPU_si0f7q2PmEi5)

The greater the amount of collateral provided by borrowers, the lower the Risk Premium.

## Bank Balance

![](/files/-MOqzU4vVPvz2B3R2Yp1)

The Risk Premium can be reduced by up to 20% depending on the borrower's bank balance relative to the size of the loan.

## Monthly Income

![](/files/-MOqzdHDW3-R6xFHrFyW)

Depending on the borrower's monthly income relative to the size of the loan being requested, the risk premium can be reduced by 20%.

## New Monthly Income

![](/files/-MOqzeMQeFzD-4iK4Iei)

A borrower's *Net* monthly income (Income - Spending) relative to the size of the requested loan can reduce the risk premium by about 10%.