Fp/101

Week Three DQ 1

Post a 150- to 300-word response to the following discussion question by clicking on Reply: 

Review p. 113 of Personal Finance and list the five C’s of credit. Provide a brief description of each. 

After reviewing page 113 of personal finance, I have concluded the information below.

The five C’s of credit are:

1.     Capacity: assessment of your ability to repay your debt. This is based on your household cash flow, as in your source of income and expenses.

2.     Capital: your household’s net worth, if your total assets are greater than your total debt, it would be possible to sell off some of your assets to gain more capital to repay a debt.

3.     Collateral: is what you own, such as a car or a home that can be used like a pledge that you will repay the debt or lose your car or home in exchange for the debt you owe.

4.     Character: this shows what kind of a person you are in regards to past history such as credit, employment, and education, this shows what experience you have paying on your debts.

5.     Conditions: this can be an individual’s circumstances or reasons why a lender may give you the loan, there looking at things like the current economy and what employment opportunities that are available for you in your area. If your credit history is insufficient, you may still qualify for the loan with the help of a co signer.