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ScanSolve AI Answer
The "5 Cs" are a framework used by lenders to assess the creditworthiness of potential borrowers and the quality of loans. Here's what each term means: • Capacity refers to the borrower's ability to repay the loan, typically assessed by their income, debt-to-income ratio, and cash flow. • Collateral is an asset pledged by the borrower to secure the loan. If the borrower defaults, the lender can seize the collateral. • Condition examines the purpose of the loan and the economic environment that might affect the borrower's ability to repay. • Capital refers to the borrower's existing assets and net worth, indicating their financial stake in the venture and ability to withstand financial setbacks. • Character assesses the borrower's credit history, reputation, and willingness to repay debts, often reflected in their credit score. These 5 Cs help lenders determine the risk associated with extending a loan. 3 done, 2 left today. You're making progress.