It is truism that lenders are looking for good business. And good business translates into profits for the bank. This means that lenders when get an application for a car loan evaluate it with the same scrutiny as the banks and their car loans. For lenders to be effective in getting a profit for the bank they use what can be categorized as 4 Cs.

These 4 Cs work as a tool by which a lender analyzes you and your credit rating. Just like the 4 Ps of marketing mix to help the marketers in better marketing efforts, these 4 Cs help the lenders to be emphatic about you and your financial situation. Being prepared to tackle these 4Cs will help you in getting a loan cohesively and without any unnecessary hiccups in an amazing manner. The 4 Cs are:

1. Capital

2. Capacity

3. Character

4. Collateral.

Capital:

This C is easy to tackle. It relates to your impression i.e. how reliable you’re with the capital. The lender will try to create an impression with regard to your financial holdings telling how much money you have how many bonds and certificates of deposits or in any other form of liquid assets you have. The purpose is very easy to comprehend. They want to establish whether you have the ability to come around with the installments and other payments or not. Banks usually do this in both discreet and open manners to gauge faithfulness and to audit your potential to pay for the car loans.

Capacity:

In this part of evaluation the lender figures out the stress that you can take under the loans. Simply put, it judges whether you can afford the loan and also maintain and be consistent with your other financial obligations. They try to determine your main source of income and other sources of money that you may have. They establish your current debts, the amount you will be putting in the loan payments and the amount you will be using for other purposes. This C helps the bank understand if you are financially eligible for car loans and to gauge the risk of default on your side.

Character:

This C as the name suggests helps the bank in evaluating your personality and tendency for payback of car loans. The bank creates your standing on previous engagements where you have used loans to finance your needs. It measures you up against your efficiency in the payment of bills and the credit facility you used.

Collateral:

This is the strongest C of them all as it decides the security that you give the bank for getting the loan. In case of new car loans it is the car itself which in case of non repayment is forfeited to the bank. In case the value of the car is not high enough, something that is of an equivalent value, is held in security by the bank. It could be jewelry, property or any other item that is of equal value.

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Category: Finances
Keywords: car loans