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Making Cents- Credit Conditions

Jul 7, 2020 | Brian Powers

Welcome back to Making Cents of Finance! In our last article, we discussed collateral and how it works regarding personal credit. Now we will talk about the final of the 4 C’s of Credit—Conditions. 

What are credit conditions? 

There are many different factors of credit conditions—some of which lenders use to determine whether to lend to a potential borrower as well as dictating the terms of a loan if approved. There are other outside factors lenders may consider, such as: trends in industry, changes in legislation, and economic cycles.  

Conditions most potential borrowers should consider in their loan process are the money’s intended use and the borrower’s goal(s). If a borrower is asking for a larger sum of money, a lender will ask where the money is being spent, such as buying a home, starting a business, or another reason.  

Other types of loan conditions to consider are factors such as the interest rate offered to the borrower, the amount of principal (which is the base amount of money the borrower is requesting),  and amortization (a regular schedule of payments that are applied to both the principal and interest balances). 

How do conditions affect my loan? 

As we’ve discovered, all 4 of C’s of Credit seem to work both together and separately. The better a borrower’s credit history, the lower the interest rate will be on future loans, which could also have an impact on how much you can borrow.  

This installment wraps up our miniseries covering the 4 C’s of Credit a bit more in depth, and we hope these have been not only informative, but also clarified how credit works. If you have any questions, you can check out our page on  personal lending, or look here to find your local branch o discuss your options.