World Business Expo

Asking for a loan? Know what bankers call today!

Have you recently applied for a loan at a bank or intend to soon? If so, is competing for credit in an environment of extreme scarcity, and is a good exercise walk in the shoes of the banker and think what they are set to consider an application?

Traditionally, there is talk that banks attach importance to the “Five Cs”: Character, Capacity, Capital, Collateral and Conditions.

Character: what kind of person are you?
* The credit report. Banks are going to assess whether it is “paying the debt” through your credit history. With the economic crisis, banks are much more demanding this and demanding payment history must be practically free from late payments and outstanding debts. Before applying for a loan in the bank, check your own credit report by going to Annual Credit Report.
* References and credentials. The bank may want more information about who you are, and can obtain information through personal or professional references, credentials, etc..

Capacity: will you have enough money to make loan payments?
* Cash available. It is important for the bank – and yourself! – Be sure you’ll have enough money to repay the loan. Anticipate the bank and an analysis including not only income, but especially their expenses. In these days of crisis, one of the expenses that the bank will take special care with is the mortgage payment. If you have a mortgage with adjustable rates (ARMs by its initials in English) will be more difficult for the banks will lend money.
* Stability of income. Do you have a stable income? If you have a job, the more stable industry that is working better. Remember that the financial industry is one that is most at risk in those days.

Capital: How much money could generate if it needed?
* Assets. If you sell all the properties and pay all its debts and recover, how much would be left at the end? This is an indicator of how much money you can get if he were in trouble. During the economic crisis, many people have lost their capital. If you have your capital intact, it helps a lot in the application.
* Capital invested in a company. If applying for a business loan, which has invested personally in the business is capital invested in it, and is an indicator of how much has endangered their party. The banks prefer to share the risk!

Collateral: What can you offer as collateral for your loan?
* Goods. As the credit environment is extremely competitive, it is worth thinking about the options you can offer as collateral for the loan. Think about what you have, such as cars, computers, etc..
* Persons signing as guarantors (guarantees). A good alternative is to find someone to sign their loan guarantee. That is, a person who undertakes to repay the loan if it were the case that you can not afford it.

Conditions: How the economic crisis affects you?
* Economic climate. In the current economic climate, one of the concerns of the bank will be you might lose your job or your business. If people are losing their homes, their businesses and their jobs, the bank will take into account the risk that you may be among those affected. For example, if the industries most affected by the financial crisis are the consumer and the bank will be more sensitive to the risk if you work in these industries.

With this information in mind, try to make your application as robust as possible. Nothing guarantees that the loan is approved, but knowing how the bank makes its decisions will help you know what to expect and how best to position the bank.