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Applying for a Loan: The Three Cs |
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Loans -
Car Loans
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When you apply for credit, your lender will review three main factors to decide whether you are a good credit risk and if you will be able to pay back the loan. These factors are often called the Three C's.:
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The Three Cs:
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What does this mean?
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Questions you may be asked from the lender
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Why is this important to me?
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Capacity
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Your present and future ability to meet your payments.
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- How long have you been in your job?
- How much money do you make each month?
- What are your monthly expenses?
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- Your lender would like to see that you have held the same job, or same type of job, for at least a year.
- Your bank will compare the amount you owe and your other monthly expenses to your monthly income.
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Capital
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Your savings and other assets, which can be used as collateral for loans.
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- How much money do you have in checking and savings accounts?
- Do you own a house?
- Do you have investments or other assets (for example, a car)?
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- Lenders want to determine the total value of your assets. Assets are things of financial value that you own.
- A positive net worth demonstrates your ability to manage your money.
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Character
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How well you have paid your bills or debts in the past.
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- Have you had credit in the past?
- How many credit accounts do you have?
- Have you ever been denied credit?
- Have you ever filed for bankruptcy?
- Have you had any outstanding judgments, property repossessed or foreclosed upon?
- Have you ever made late payments?
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- If you have a good credit history of repaying your other loans, you will have an easier time getting your loan request approved.
- Having a good credit history shows a lender you can borrow money responsibly.
- If you answer yes to any of these questions, you will have more difficulty getting approved for a loan. However, some lenders will ask you to explain what happened. Depending on your situation, a lender might be willing to approve your loan request.
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