Banking, Loans & Credit

What Do Banks Consider Before Giving a Loan?

A bank looks at 5 things when deciding whether or not to approve a loan, called the “Five C’s of Credit”:

  1. Credit History: This tells them how consistently you’ve made payments on any loans, credit cards, or mortgages in the past.
  2. Capacity: The bank estimates how consistently you’ll be able to make payments based on your income and other financial responsibilities.
  3. Collateral: Any assets you own, like a car or a home, that the bank could take if you fail to pay.
  4. Capital: Capital is usually the money you have in savings, investments, and retirement accounts that you could use to pay the bank if you can’t repay the loan.
  5. Conditions: The things a bank looks at before approving your loan, such as the market conditions or state of the economy and other things that might affect how you can repay the debt. 

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What Do Banks Consider Before Giving a Loan?

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