5 Cs That Banks Use to Assess Borrower’s Credit Health

Financial emergencies have the habit of come knocking on your door when you are least prepared for it. As a matter of fact, you can never get rid of the possibility of a financial emergency affecting you at some point in time, but what you can do is to prepare yourself beforehand so that whenever any such situation comes, you have all the necessary resources to handle it effectively. Similarly, there are certain dreams and aspirations that you really want to accomplish,but your limited financials do not allow you that freedom. As a result, you are just busy taking care of the bare necessities of life and do not have the time, money and courage to take the big step towards fulfillment of that long-standing desire of yours.

5 Cs That Banks Use to Assess Borrower's Credit Health

In both the above-mentioned scenarios, your Achilles heel is the lack of funds. This could be due to your limited income or additional expenses, but the truth is that lack of money has been stopping you from going after your deepest wishes. There is no need to be disheartened and feel helpless as you can easily Apply for a Personal Loan to help you take care of the expenses at hand. 

About Personal Loans

 A Personal Loan is an unsecured financial product that is offered by numerous financial institutions in India. As it is unsecured in nature, there is no need to provide collateral for the facility,and the money can be used as per your requirements, without any intimation to the lender. As there is no collateral to secure the money, lenders charge higher interest rates against Personal Loans. The maximum repayment tenor available is 60 months,and the highest amount available can go up to Rs. 50 Lakhs.

There are various parameters that are assessed by a lender to ascertain your eligibility for a personal loan including your credit score, net worth, repayment capacity, debt exposure and a few critical financial aspects. Personal Loans are available for salaried as well as self-employed individuals.

You can apply for a Personal Loan using online finance marketplaces such as MyMoneyMantra. Here you can compare different loan offers, their terms and conditions, interest rates, benefits and other necessary information that will help you make an informed decision. After you have shortlisted the best Personal Loan offer, you can apply for the same using the online application form which requires minimal details for processing. If your profile meets the guidelines specified by the lenders, you will receive the money in your account within a few hours itself.

5 Cs That Banks Use to Assess Borrower’s Credit Health

With the rising instances of NPAs (Non-Performing Assets) and defaults in the financing sector, lenders have been following a rigorous methodology to assess your eligibility for a loan. They evaluate your profile on a number of parameters and conduct several checks before approving your application. This approach is popularly known as 5 Cs method. Here are 5Cs that Banks use to assess your credit health.

  1. Character

Lenders assess your credit report in order to understand your character,i.e., whether or not you have the intention to repay. Your credit report is the numerical representation of your creditworthiness and is computed by Credit Information Bureaus such as CIBIL based on a number of parameters. These parameters are linked to your past credit behavior and help a lender to understand the likelihood of your making the repayments on time. Ideally, your credit score must be 750+ with no history of defaults if you are to get your application approved.

  1. Capital

After the lenders have assessed your application on the basis of your credit score, they want to ensure that you have some form of financial assets such as fixed deposits, gold or insurance policy in order to secure the repayment if there is an emergency. They might ask you to produce your net worth statement approved by a Chartered Accountant for the same.

  1. Collateral

There are certain loans that are not approved unless and until you have a collateral to pledge with the lender to secure the repayment. Car Loan, Machinery Loan,and Home Loans are examples of such loans which are approved only if an asset is mortgaged with the lender.

  1. Conditions

Lenders will try to ascertain the stability of your job/business based on the prevailing market conditions. This is important to ensure that you will have a stable level of income over an extended period and will be able to repay the EMIs (Equated Monthly Instalments) on time.

  1. Capacity

Lenders will assess your repayment capacity to ensure that you are able to serve the EMIs on time. As a rule of thumb, it is assumed that you can use maximum of 50% of your monthly income to make EMI payments as the remaining 50% is required to take care of your monthly expenses. If your repayments exceed the 50% threshold, you will be considered a risky customer,and your application might be rejected.

It is essential for you to understand that lenders want to ensure the repayment of their money in a timely manner and that is why they follow such a stringent screening process. You must also assess your profile against these guidelines and proceed ahead only if you are satisfied with your performance against these 5Cs.

Also Read:3 Smart Ways to Avail a Low Interest Rate Personal Loans

To apply online for Credit Cards, Secured Loans and Unsecured Loans, visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 70+ Banks and NBFCs. We have served 2 million+ happy customers since 1989.

Talk to our Loan Specialists toll-free at 1800 103 4004 to know more about our products and offers.

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