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Loans

Applying for a Loan

When you apply for credit, your lender will review three main factors to decide whether you are a good credit risk and if you will be able to pay back the loan. These factors are often called the Three Cs.

The Three Cs: What does this mean?
 Questions you may be asked from the lender Why is this important to me?
Capacity Your present and future ability to meet your payments.
  • How long have you been in your job?
  • How much money do you make each month?
  • What are your monthly expenses?
  1. Your lender would like to see that you have held the same job, or same type of job, for at least a year.
  2. Your bank will compare the amount you owe and your other monthly expenses to your monthly income.
Capital Your savings and other assets, which can be used as collateral for loans.
  • How much money do you have in checking and savings accounts?
  • Do you own a house?
  • Do you have investments or other assets (for example, a car)?
  1. Lenders want to determine the total value of your assets. Assets are things of financial value that you own.
  2. A positive net worth demonstrates your ability to manage your money.
Character How well you have paid your bills or debts in the past.
  • Have you had credit in the past?
  • How many credit accounts do you have?
  • Have you ever been denied credit?
  • Have you ever filed for bankruptcy?
  • Have you had any outstanding judgments, property repossessed or foreclosed upon?
  • Have you ever made late payments?
  • If you have a good credit history of repaying your other loans, you will have an easier time getting your loan request approved.
  • Having a good credit history shows a lender you can borrow money responsibly.
  • If you answer yes to any of these questions, you will have more difficulty getting approved for a loan. However, some lenders will ask you to explain what happened. Depending on your situation, a lender might be willing to approve your loan request.