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Name and describe the “C’s” of credit that Banks and other lenders use in evaluating loan...

Name and describe the “C’s” of credit that Banks and other lenders use in evaluating loan applicants. Which do you consider the most important and Why?

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Answer #1

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The C's that are used to evaluate the loan applicants by the banks and other lenders are total five in number.

First C is Character: evaluates borrower's credit history; Second C is Capacity: the borrower's debt-to-income ratio; Third C is Capital: the amount of money the borrower has; Fourth C is Collateral: the asset of the borrower which acts a security for the loan; Fifth C is conditions: the purpose of the loan, etc.

I consider the first C - Character, the most important. Because the character of the borrower is important in determining that whether he will be able to repay the loan or not. In times of crisis of the lender the borrower should stay up to his words to repay the loan, and this is signified my the character of the borrower.

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