Every financial institution is faced with the fact that one of the clients or several persons stubbornly refuses to pay their debts. Of course, for many of the bank's clients, a turning point comes when the loan repayment becomes especially difficult. However, the employees of the organization who finance the client must correctly assess his solvency even before issuing him a loan. How is it evaluated?
It is impossible to accurately calculate the probability that the client will refuse to pay the loan on time. But it is possible to calculate his approximate solvency rating by the method of five "C". By this method, companies mean evaluating five criteria, each of which begins with the English letter "C". What is important to evaluate?
- Character - Character. By communication with the client, as well as by the existing experience of cooperation, it is possible to determine his credit obligations. Experienced security personnel and all employees of the financial structure can see an unscrupulous payer almost immediately. This criterion cannot be taken as a basis, but as practice shows, it can provide a lot of valuable information. When a client decides to apply for a loan online , banks skip this evaluation criterion .
- Capacity - Opportunity. Whatever the desire to pay off existing debts, and without appropriate cash flows, this will not work. That is why banks diligently study their client's money turnover before issuing a loan.
- Capital - Capital. Of course, a client with a large cash turnover and a considerable amount of funds in the account is an ideal option for a bank. If, for some reason, the flow of funds to the client's account stops, he will lose his permanent source of official and additional income, then the financial reserve will help to pay off the debt.
- Collateral - Collateral. The more backup payment options there are, the more favorable the terms of loan repayment will be. Pledging property, own business and other valuables gives banks additional financial protection from defaulters.
- Conditions - Conditions. The bank will be forced to assess not only how things are with the client's business and the sphere of his employment at the moment, but also make some forecast. Typically, customer finance organizations will have no problem finding out about upcoming forecasts in different areas.
