You’re probably aware that a good credit score is imperative for landing a great personal loan offer, but do you know what other factors lenders consider? Whether you’re applying for a quick personal loan, private loan, instant loan, or any other financing option, lenders usually consider these three factors to assess your creditworthiness.
These three C’s of credit can be best defined as the qualitative and quantitative factors most lenders assess before deciding whether or not to sanction your loan. These factors also play a role in determining your interest rate.
While lenders consider these factors, it is also important on your end to analyse them. This will help you figure out the right strategy for getting the best offer on your quick loan.
Credit History
It goes without mention that one of the first factors that lenders will consider is your credit history. Interchangeably known character history, this is the factor that offers a track record on how you manage debts.
Your credit history is available on your credit report, and its primary role is to outline your payment history and your existing line credit. While checking this report, lenders will assess how responsible you are in managing credit.
In addition to the credit history, your credit score will also be factored in. For the uninitiated, credit score is the number that’ll weigh out your risks as borrowers. So, the higher your score is, the less risky will you be deemed to be.
Capability
This is yet another extremely essential ‘C’ of credit. But what is capability in the first place? What does it imply in the lending scenario? In the simplest terms, capabilities refer to your current income, history of employment, and outstanding dues. These factors are collectively considered to check if you’re capable of affording a new quick loan payment.
Most lenders will use the debt-to-income ratio for assessing your capability. This is the ratio between your monthly income and existing debts. Remember, the lower your debt-to-income ratio, the higher will be your chance to apply for a new loan.
Conditions
In certain cases, the lender might want to know how you’re planning to use your quick cash loan. While these loans usually do not require you to state a reason, certain payday lenders or banks might ask you for a conclusive purpose. Once you mention the purpose, it’ll then go on to factor the decision of the lender.
That said, conditions might also indicate the market environment prior to your loan. For instance, if you’re taking a variable rate loan when interest rates are higher, it will automatically add an added risk to your repayment ability. Lenders will take note of these factors, before finally sanctioning the loan to you.
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