Directions: Identify the following factor descriptions to their corresponding C of credit. The five C’s are listed below:
•Capacity means the ability or intent to repay your debts, basing it upon your household cash flow; lenders typically follow different methods to consider my expenses relative to the person’s income.
•Capital is the household’s net worth, by combining all assets, and making sure that the debts is smaller than the total assets, the lender can verify that the loan will be paid by liquidating all assets should you need to pay your debts, sort of risking all you got in order to get their trust.
•Collateral can be either your car, home, boat, anything that you can pledge to make the loan safer, and the lender feel that you are not being a high-risk loan, because you can lose your own assets.
•Character is the history behind your credit, employment, and education, as well as how well you handle your obligations, such as accrued debts in the past that were taken care of. They measure your trustworthiness.
•Conditions are the considerations a lender makes after viewing the broad spectrum of your situation, being that every loan is unique in its situations, the lender can take into considerations your economic status, the employment opportunities in your area, or anything that will make you either less of a risk or more.
Your household cash flow helps to determine this C:Capacity Under these __________, you may still be approved with a cosignerConditions This demonstrates how much your assets are worth.Capital
Using your car or house as a promise to payCollateral
This makes you a better credit risk to the lender – this could be any of the C’s. For example, assets that are offered as security against default. Collateral and Capital Lenders will evaluate your debt-payment ratio.Capacity
The lender is taking your unique situation under consideration.Conditions Previous credit...