Back in the good old days ( when I inadvertently ended up being a bank manager!), lenders used to follow a practice called "Prudential Lending" i.e careful, prudent lending. How did they do this? Simple really, the applied a standard set of rules called "the 4 C'S of Credit":
1.Character - what does the applicants history look like? do they show job stability, stability of residence/relationship/ employment etc?
2. Collateral - how much cash do they have to contribute to the scenario? Can they show the discipline of a savings pattern?
3 Credit - what is their credit record like? Have they successfully re- paid previous debts?
4.Capacity (Cash flow) - how much money are they earning and can they afford the repayments after all living expenses and other debts are taken into account?
When a lender received an application, all 4 of theses aspects of a persons life were assessed in order to (rightly or wrongly) get to the outcome of approved or declined.
Frequently people would be strong in 3 out of 4 catagories but still get the big thumbs down from the bank, this opened up a very big door in the world of finance
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment