Four C’s Of Credit: How Banks Determine If They Should Accept Loan Applications

Four C’s Of Credit: How Banks Determine If They Should Accept Loan Applications

Getting approval for a loan application is no easy task. Everything needs to be perfect. And to be honest, banks aren’t entirely to blame either. After the 2008 financial crisis, the banking sector has become far more regulated. The lending criteria for banks have also become stricter. There are certain factors that banks take into account when they’re reviewing loan applications. These are collectively referred to as 4 C’s of credit. Let’s take a look at these: Character The first C of credit is ’character.’ This means that banks assess an individual’s character and determine if they are likely to return the borrowed amount or not. They start by researching your credit history. They’ll see if you have ever defaulted on your payments in the past. They‘ll also check your credit score. If you have a low credit score, the bank is likely to reject your application. The thing about credit scores is that they can be improved over time; so even if you have a bad score currently, you can work towards improving it at a later date. Capacity Capacity refers to a person’s ability to pay back the borrowed amount. It determines a person’s capability to pay back the loan by assessing their current income level and their debts. Lenders use the debt to income ratio to do so. They add together all the debts of the applicant with their income. A low debt to income ratio will increase your chances of getting the loan. Ideally, you should have a debt to income ratio of 43% or lower in order to secure the loan. However, there have been...
Why Investing Is Real Estate Is a Smart Choice

Why Investing Is Real Estate Is a Smart Choice

You might have heard investors talk about how the real estate sector in the US is a potential goldmine? Why do investors say things like that? What is it that makes the real estate sector so appealing? Investors are always on the lookout for investment opportunities, and all signs indicate that the real estate sector will be an extremely lucrative market in the near future. Statistics suggest the same. In 2017 alone, there was 11% growth in this segment. If that’s not enough, take a look at some additional reasons why the real estate sector is considered to be so lucrative: Affordable Start with looking for property in residential areas. If it’s a popular place, the prices might be high; but you’ll also be setting the rent accordingly, so you’ll recover your investment after some time. Furthermore, you always have the option of investing in property in the outskirts of the city. These properties are affordable. Their average rent is also relatively high, so it’s a win-win situation for you. Steady Cash Flow A lot of people invest in real estate in order to prepare for their retirement. That’s because real estate investments ensure a steady stream of cash in the form of rent. Rental income is usually high and it covers additional expenses like maintenance and insurance. Over time, you can save up money and invest in more property. Another benefit of investing in real estate is that property value rarely ever depreciates. If anything, the prices increase over time. So later on, you can sell the property at a higher rate and make a hefty profit. Multiple Options...