Economics- Unit 2- Study Guide

This "C" indicates your ability to repay a loan.

Current income and debt will be taken into consideration.

• Collateral

• Capacity

• Capital

This "C" references your financial responsibility. Questions will be related to payment history, employment, and type of credit you've had in past.

• Character

• Capacity

• Capital

You own your home and want to take out a loan with the bank so that you can buy a boat. If you cannot repay your loan the bank can come after your home, etc.

• Character

• Capacity

• Capital (collateral)

How long have you lived in your home?

• Character

• Capacity

• Capital (collateral)

Is your spouse employed? Does your family have double incomes?

• Character

• Capacity

• Capital (collateral)

My wife is a Nurse and current has a $85,000 salary and I'm a Police Officer making $92,000. What kind of loan can we afford?

• Character

• Capacity

• Capital (collateral)

Do you have a savings account? Do you have expensive jewelry? What other investments do you have that the bank would value if you can't repay this loan?

• Character

• Capacity

• Capital (collateral)

Have you ever been refused credit? Have you been late on any of your payments? Did you go on vacation rather than paying your cable and cell phone bills?

• Character

• Capacity

• Capital (collateral)

Have you regularly made payments on time? Do you save a large percentage of your income? Do you have an emergency fund? For all of life's bumps in the road are you prepared?

• Character

• Capacity

• Capital (collateral)

What is RISK, from the perspective of the lender, mean?

• how likely or unlikely the borrower is to repay the loan

• how new or old the borrower's assets are

• whether or not the lender has enough to lend to the borrower