What are the 4 C's in loan?

What are the 4 C's in loan - The 4 C's in the context of loans are commonly referred to as the "Four Cs of Credit." These are criteria that lenders often consider when evaluating a loan application. 

The Four Cs are :

1. Creditworthiness : 

This refers to the borrower's credit history and their ability to repay the loan. Lenders assess factors such as the borrower's credit score, payment history, and any outstanding debts. A good creditworthiness increases the chances of loan approval.

2. Capacity : 

Capacity refers to the borrower's ability to repay the loan based on their income, employment status, and existing financial obligations. Lenders evaluate the borrower's income stability, employment history, and debt-to-income ratio to determine their capacity to make loan payments.

3. Collateral : 

Collateral is an asset that a borrower pledges to secure the loan. It serves as a form of security for the lender in case the borrower defaults on the loan. Collateral can be in the form of real estate, vehicles, or other valuable assets. Lenders assess the value and quality of the collateral.

4. Conditions : 

Conditions refer to the purpose of the loan and the economic conditions that may affect the borrower's ability to repay the loan. Lenders consider factors such as the loan amount, interest rate, loan term, and the borrower's intended use of the funds. They also consider external factors such as the state of the economy and industry trends.

By evaluating these Four Cs, lenders can assess the risk associated with a loan and make informed decisions regarding loan approval, interest rates, and terms.

Categories: Capacity, Collateral, Creditworthiness, Four Cs of Credit