DEFINITION of 'Five Cs Of Credit'
A method used by lenders to determine the credit worthiness of potential borrowers. The system weighs five characteristics of the borrower, attempting to gauge the chance of default.
The five Cs of credit are:
INVESTOPEDIA EXPLAINS 'Five Cs Of Credit'
This method of evaluating a borrower incorporates both qualitative and quantitative measures. The first factor is character, which refers to a borrower's reputation. Capacity measures a borrower's ability to repay a loan by comparing income against recurring debts. The lender will consider any capital the borrower puts toward a potential investment, because a large contribution by the borrower will lessen the chance of default. Collateral, such as property or large assets, helps to secure the loan. Finally, the conditions of the loan, such as the interest rate and amount of principal, will influence the lender's desire to finance the borrower.
1) Financial assets or the financial value of assets, such as ...
A loan that a lender considers at risk for nonpayment. Banks ...
Property or other assets that a borrower offers a lender to secure ...
1. The failure to promptly pay interest or principal when due. ...
The act of giving money, property or other material goods to ...
A loan that is issued and supported only by the borrower's creditworthiness, ...