Understanding the 5 C’s of Credit
Before applying for a loan
If you’re like most farmers, ranchers, or rural landowners, you’ll need to borrow money at some point to fund expenses. To get the capital you need, it helps to understand how credit decisions are made.
Most lenders, including AgTrust Farm Credit, consider five criteria– known as the Five C’s of Credit. These are used when reviewing a loan application and setting a loan’s terms and conditions. Understanding these key factors can help prepare you to meet with your loan officer:
- CHARACTER: the borrower’s dependability and integrity
- CAPACITY: the applicant’s financial capacity to repay the loan and meet all financial obligations
- CAPITAL: the applicant’s liquidity and solvency
- COLLATERAL: the physical property that will minimize the lender’s risk in the event of loan default
- CONDITIONS: the conditions for granting and repaying the loan
Learn more about the 5C’s of Credit here: Understanding the 5 C’s of Credit before you apply for a loan