Personal Finance presentation, five C’s of credit conditions prepared to get financially fit by practicing personal finance. First, we will take a step back looking at the five C’s of credit common things that lenders will be taking a look at when assessing whether or not to give a loan or financing. Then we’ll zoom on to specific set of conditions for this presentation. So the five C’s of credit. These ones are the items we’ve seen in prior presentations, which include credit history, capacity, collateral, capital, now we’re looking at conditions.
00:35
So conditions, conditions refer to a variety of factors that lenders may consider before extending credit. The conditions may include now we’re looking at the specific conditions of the situation for particular loan, which could include how you plan to use the proceeds from the loan or credit account. So that could be important, it could be a factor that’s going to be impacting risk. And you might be saying, Well, what does it matter, Mr. lender, you know, my what I’m going to be using it for?
01:02
Well, obviously, if they’re given the loan if they’re given the money, and it’s going to have an impact on whether or not they believe that they’re going to be repaid, in terms of the loan, they get a measure of their risk factors and some of the conditions what you’re using the money for, could be something that’s going to help them to make that assessment how your loan amount, interest rate, and term may be impacted by market conditions or the state of the economy.
01:27
So clearly, we got to take into conditions the conditions of in essence, simply the economy at this point in point in time, and how that could impact the decisions being made. Other factors that may impact your ability to repay the debt. So obviously, they’re looking at conditions that might hinder your ability to repay or enhance your ability to repay because of course, they’re trying to make their money on the interest of the loan, which will include or require the repayment of it.
01:54
So for example, a mortgage lender wants to know if the property you’re buying is in a flood zone, or in an area prone to wildfires, clearly, if it’s a home loan, or something like that, they’ve got the home on as collateral. But if there’s some kind of catastrophe that happens, and it’s fairly likely to happen, given the fact or at least more likely than normal, the property’s in a flood zone or fire zone,
02:18
then the fire itself could wipe out both income and the collateral of the property, which would be not a good thing that would increase the risk with regards to the lender as they are using the property as collateral to make sure that they’re getting repaid on the loan. So conditions, why it matters conditions matter because they may impact your financial situation and ability to repay the loan.
02:40
So clearly, these are other factors that the bank is looking at to see whether you can repay the loan. And they’re therefore they’re going to be factors in determining the conditions or loan of the loan that we will get the rates and so on. So lenders may also consider your customer history when you apply for new credit, since they may evaluate your overall financial responsibility, the relationship you’ve established with them can be valuable when you need more credit.
03:08
So obviously, your relationship as someone who’s been working with the financial institutions and ability to work with the financial institutions can be something that could be reflecting favorably or unfavorably with regards to whether or not the institution wants to be providing credit.