What are the basis of credit?

1 Answer(s)

Character. This refers to the personal integrity of the borrower. His determination to pay can be evaluated by his past business record. Character also includes personal habits, attitudes, or vices of the borrower. Capacity. This has something to do with the managerial ability of the borrower. Could he use wisely and efficiently his loan? Factors like responsibility, maturity and business competence of the borrower determine his capacity to pay. Capital. This refers to the resources owned by the borrower such as priorities. With such properties, the ability of the borrower to obtain credit has become greater. Collateral. Usually, the title of the land is required as a security of the loan. This is a safety measure for the payment of the loan. Buildings, machines and other valuable properties are used as collaterals. Condition. Conditions in the community, industry, or the whole economy affect the ability of borrowers to pay their loans. For example; peace and order, inflation, profitability of a project, etc.

Jessica Default Answered on April 23, 2015.
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